Twitter stock closed at $US45 a share after its first day as a public company.
This price values the company at about $US31 billion.
This price also gives Twitter a “revenue multiple” of about 15X 2015 estimated revenue of about $US2 billion. That’s a significantly higher multiple than the stocks of Twitter’s closest comparables, Facebook (~10X) and LinkedIn (~10X).
There are some future scenarios in which Twitter can justify this valuation — namely, if the $US2 billion revenue estimate for 2015 turns out to be very low — but these scenarios don’t seem particularly likely. And even if the $US2 billion revenue estimate does prove low, the upside for the stock from this level doesn’t appear to be particularly compelling.
So, although I wouldn’t be rushing to short Twitter at $US45 (as I explained two days ago, there’s a massive growth story here), I certainly wouldn’t be elbowing people out of the way to buy it at this level.
Some Wall Street analysts, meanwhile, have an even less rosy view. Yesterday, in the middle of the trading day, one bravely downgraded Twitter to SELL. And, this morning, another, Daniel Ernst of Hudson Square Research, initiated at SELL.
Mr. Ernst also headlined his note with one of the most amusing research report headlines ever.
(Back when I was an analyst, the compliance folks would have freaked out if you used language like this. I remember trying to smuggle the word “roadkill” into a report, for example, only to see it replaced with “likely to experience downside volatility” or some similar euphemism).
“Flip The Bird,” Mr. Ernst says.
Those hoovering up Twitter at this level have been warned.