It appears that TWTR's IPO price will be $26.00/sh
representing a market cap of $18.3bil (based on the fully-diluted share count
of 705MM), 37.5% higher than our $13.3bil (or $18.90/sh) valuation of the Company. As usual, those investment
bankers did a good job of 'selling the idea' to potential investors.
We are not saying tomorrow's TWTR IPO will be
a failure similar to FB's last year.
However, in our opinion, it is over-priced. But it is more likely that the market will
accept it with open arms as equity indexes keep hitting new highs and the momo
stocks (except for TSLA) still have some ... momentum. TWTR has chosen the right time for an
IPO. Now let's see if 1) the Company can
execute and meet/exceed expectations; and/or 2) if the latest momentum-mania
slows down a bit or comes to a halt, how much will the abnormally high
valuation multiples be discounted.
Even
our much lower valuation of the Company represents some very very high
valuation multiples. While we do admit to our optimism, it appears that the investment
bankers have gone even further, as shown in the table below. Let's
put it this way: in our model, TWTR's EV/Sales and EV/EBITDA multiples based on
our 2017 estimates are comparable to GOOG's multiples based on its trailing 12
months (Sep '12 - Sep '13) financials.
While this seems out-of-whack, multiples from TWTR's official IPO price
(also based on our estimates) do not become comparable to GOOG's until 2018, basically 5 years from today!
Overall, we like the Company's offerings and its strategy
going forward, and we note that we are an avid user of Twitter; however, we
don't think the Company is worth more than our best-case scenario valuation of
$18.3bil.
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