Twitter (TWTR) recently rose 75% to $45.50, which gives it a market capitalization of about of about $25 billion, valuing it higher than half the companies in the S&P 500.
Beverly Hills, CA -- (SBWIRE) -- 11/15/2013 -- Twitter has more than 230 million active users that send out more than 500 million tweets per day. This social media service is utilized by restaurants offering daily specials to individuals reporting real time events taking place all over the world. When the company was founded in 2006 its goal was to simplify communication among like-minded individuals.
Today, Twitter the micro-blogging service, has monetized real-time news tracking and research. According to Peter Tasca of Laureate Trust, “It has become a powerful share information service used by corporations, presidents and students all around the world.”
Twitter reported revenue of $254 million in the six months ended June 30. The company more than doubled the $122 million in revenue the company generated in the first half of 2012. The company also reported a net loss of $69 million in first half or this year, which compares with a net loss of $48 million in the same period a year earlier.
Twitter is the last big social network to go public, the company initially set a price range of $17 to $20 per share but due to high demand raised it to $23 to $25. Twitter eventually raised more than $2 billion selling shares at $26 on their IPO.
The primary concern for investors is the lack of profitability which lost over $60 million in the third quarter. According to the average of analysts’ estimates compiled by Bloomberg, the company is unlikely to make a profit until at least 2015.
Heiko Geiger of Vontobel Europe AG in Frankfurt stated, “We have seen strong interest on the short side ever since Twitter started trading above its IPO price.”
Laureate Trust projected an enterprise value of $13.6 billion or $25.00 per share. They used valuations from Facebook (FB), LinkedIn (LNKD), and Google (GOOG) the closest peers to Twitter to base assumptions on the companies’ performance and financial metrics. Tasca states, “We are conservative in our approach since Twitter did not disclose advertiser metrics which is necessary for modeling projections.”
Twitter said in their filing that it wants to become an indispensable companion for “live human experiences,” adding that it plans to grow by expanding its user base, branching out internationally and making ads on its platform more relevant.
Twitter has a long way to go, it has more than 215 million users compared to 1 billion for Facebook and annual revenue of $600 million, while Facebook generates more than $5 billion.
Tasca states, “Twitter is a great concept but the business model still needs to be proven as profitable and sustainable.”
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