Twitter filed for its IPO using
a new confidential process, so few people are privvy to the company’s exact financial performance yet.
But word travels fast, and according to a note this morning from Sun Trust analyst Robert Peck, a sharp Wall Street analyst who has made good calls on both LinkedIn and Facebook, the scuttlebutt is the following.
The early Twitter IPO “price talk” is $US20 billion.
This would be 17-times Twitter’s projected 2014 revenue of $US1.2 billion.
We don’t have precise information yet on Twitter’s financials over the past few years, but the company’s growth rate is said to be about 100% per year. So the projection of $US1.2 billion of revenue in 2014 would be up from, say, $US600 million this year. (We’ll know more when we see the filings).
A multiple of 17-times 2014 revenue, meanwhile, compares to 2013 revenue multiples of 15-times for Facebook and 19-times for LinkedIn.
So this price would be in the ballpark of where similar companies are trading.
(The Twitter multiple is a “forward year” multiple, so Wall Street analysts should eventually use 2014 revenue projections for Facebook and LinkedIn for comparison. But at first glance the initial price chatter doesn’t seem preposterous. It also doesn’t seem cheap. But they’re not going to give Twitter away…)
One thing that Twitter has going for it, especially relative to Facebook, is that it’s going public much earlier in its growth curve. Facebook already had $US4 billion in revenue when it went public, and its revenue growth was decelerating rapidly. Wall Street hates deceleration, which is why it was hard to understand why investors were willing to pay so much for Facebook’s IPO. Twitter’s revenue growth, meanwhile, should still be accelerating, or at least holding at near a triple-digit rate, when the company goes public. And Wall Street goes bananas about growth like that.