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Don’t let Facebook “chaos” put you off Twitter IPO
Twitter goes public Wednesday, in this years most anticipated listing, but has the chaos around the Facebook listing put you off? If you are reluctant to invest, Saxo Bank’s Peter Garnry explains that things will be rather different when Twitter goes public.
Firstly, he says Twitter’s growth rate is higher than what Facebook had prior to its IPO. It also has a growing brand, a lot of different media partners and it’s getting “integrated everywhere on the internet”.
In addition, Peter says the company’s revenue growth is very impressive; in 2010 it was USD 28 million, this year it grew to USD 650 million and now it’s expected to grow to USD 1.2 billion in 2014.
So the whole question for Peter is whether Twitter can get the cost structure in the right place. If it can, he reckons the company can earn “a lot of money for investors”.
Twitter has said it will set its IPO shares at about USD 17 – USD 20 a piece. But Peter reckons that this pricing might be too aggressive.
He says if we compare the pricing to the sales expected in 2014 - of USD 1.2 billion - this translates into an enterprise value to sales of about 8. He compares this figure with Tesla Motors, a company which is already regarded as overvalued, which is trading at about 6.9 times on the same ratio.
However, Peter explains that Twitter has “a much bigger potential for huge profits” than Tesla, because the auto industry is much more capital intensive.
But he warns that in his poinion there is a flaw at USD 20 and he remains skeptical about how fast Twitter's shares can go up from that level.
01:58 minutes
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