How to value Twitter?

Not sure why the usual cited yardstick for valuing Twitter is a multiple of Twitters' YTD revenue ($14 billion market cap is nearly 30x revenue)... as opposed to EV/Revenue or EV/EBITDA. Is it because there are no similar comps, or precedent transactions that offer a valuation range?

 

Revenue multiples are standard in the tech industry for companies with negative earnings.

I would guess that Goldman is comping Twitter to other major tech IPOs. Workday, LinkedIn, Facebook, etc. Since they're using revenue multiples, maybe sprinkle in some smaller high-growth SaaS companies as well.

Btw, IPO multiples are done off of next year's forecasted revenue/earnings. Think Twitter is projected at ~$1B, so that's a 14x multiple, not 30x.

 

I recently posted a pretty lengthy qualitative reply to a different user regarding Twitter as a business here: http://www.wallstreetoasis.com/forums/bird-is-the-word

Additionally, valuation god Aswath Damodaran recently posted his thoughts on Twitter's valuation and share price here: http://www.wallstreetoasis.com/blog/the-twitter-ipo-thoughts-on-the-ipo…

 
zoomi:

Not sure why the usual cited yardstick for valuing Twitter is a multiple of Twitters' YTD revenue ($14 billion market cap is nearly 30x revenue)... as opposed to EV/Revenue or EV/EBITDA. Is it because there are no similar comps, or precedent transactions that offer a valuation range?

In response to this, as stated above, revenue multiples are common when actual earnings aren't present yet (such is the case of Twitter). That said, even revenue multiples aren't necessarily that useful for Twitter since it's still a pretty fast growing company with new upcoming revenue streams. Still, most common would probably be to look at revenue per monthly average user (MAU) and compare that to similar ad-based internet companies such as Facebook. Facebook is definitely the more mature of the two businesses, so you might compare the two Rev/MAU multiples to get a range of what the overall valuation could be.

 
Aswath Damodaran:
Could I be wrong? Of course, but I would rather be transparently wrong (hence the long blog post detailing every assumption that I made) than opaquely right. .
^This thanks for sharing!
 

Agreed. I don't see the furor over Facebook as much as this, there's logic to Facebook, whether you believe it or not. This seems quite hazy to me.

I am permanently behind on PMs, it's not personal.
 

I feel like twitter will eventually lose its luster. It receives a bunch of traffic, and has many users, but its surrounded on the idea of living vicariously through others, or caring so much about what they do. I honestly just can't see this lasting that long. If it goes public, there'll be a bunch of people that think there is so much potential, but honestly, what kind of potential does it REALLY have. 50 cent can swing the price of stocks, but when he starts pushing his new gatorade (i guess it would be vitamin water) 24/7, thus maximizing its advertising potential, the users will get pissed and over the whole concept. I'll let it grow, and short it. Hello groupon and twitter, welcome to the year 2000.

 

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