What a Tweet (TWTR) Valuation!

I don’t have a strong sense on the valuation of Twitter, but I want to share with you forty companies with valuations similar to that of Twitter (TWTR) as of the close on November 7th.

(click to enlarge)

Twitter’s valuation was around $25.9 Billion at the close of regular trading on 11/7. The private equity sponsors must be jumping for joy, as they got more than they expected on the IPO, and even more, if the price of Twitter holds up past the time of their lockup, when they can sell their remaining shares.

Twitter has no profits, and trades at 10 times book value, versus 2.3x on their competitors here. Price-to-Sales is around 50, versus 1.8 for competitors here.

There is one thing certain here, there is a lot of profits growth expected out of Twitter. It has to go from negative profits to positive, and then soar thereafter. That would justify the valuation.

But how likely is that? There are few companies that ever do that. So be wary and avoid Twitter stock, realizing there is a small chance that it might be worth its present valuation, much less more.

Disclosure: no positions in any companies mentioned here.

About David Merkel 144 Articles

Affiliation: Finacorp Securities

David J. Merkel, CFA, FSA — From 2003-2007, I was a leading commentator at the excellent investment website RealMoney.com (http://www.RealMoney.com). Back in 2003, after several years of correspondence, James Cramer invited me to write for the site, and now I write for RealMoney on equity and bond portfolio management, macroeconomics, derivatives, quantitative strategies, insurance issues, corporate governance, etc. My specialty is looking at the interlinkages in the markets in order to understand individual markets better. I still contribute to RealMoney, but I have scaled it back because my work duties have gotten larger, and I began this blog to develop a distinct voice with a wider distribution. After one year of operation, I believe I have achieved that.

In 2008, I became the Chief Economist and Director of Research of Finacorp Securities. Until 2007, I was a senior investment analyst at Hovde Capital, responsible for analysis and valuation of investment opportunities for the FIP funds, particularly of companies in the insurance industry. I also managed the internal profit sharing and charitable endowment monies of the firm.

Prior to joining Hovde in 2003, I managed corporate bonds for Dwight Asset Management. In 1998, I joined the Mount Washington Investment Group as the Mortgage Bond and Asset Liability manager after working with Provident Mutual, AIG and Pacific Standard Life.

I hold bachelor’s and master’s degrees from Johns Hopkins University. In my spare time, I take care of our eight children with my wonderful wife Ruth.

Visit: The Aleph Blog

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