Many investors jumped on and grabbed shares at the Facebook IPO a year and half ago. They were so happy, but unfortunately, they all saw the share price dip by over 50%. It took more than 14 months to recover to its IPO level and now Facebook are a little bit above the IPO price. Now it is time for Twitter IPO.
Companies like that usually have a high growth in revenue, and the average revenue growth for Twitter is 170% per annum. To compare with Facebook, they had an average growth revenue of 87%.
The big difference is that the revenue for Facebook was $3,7 billion in its pre-IPO, and Twitter`s revenue was $316 million in 2012. That is ten times what Twitter currently generates. Facebook and Twitter are both in the social network business with similar revenue models.
Take a look at the chart below. This chart compare the two company`s ads-revenue growth. Twitter is much younger than Facebook but Twitter`s ad revenue is following similar trajectories.
The mobile ads from Twitter is a greater share of its overall revenue than Facebook. About 70% for Twitter and 49% for Facebook.
I don`t think Twitter have hungry investors trying to enrich themselves during the IPO like we saw during the Facebook IPO. Twitter is on the way to lose about $100 million this year. This is good news for investors because you know they need money.
Twitter will use all the money from the IPO to build a stronger and more profitable business. The future looks bright for a stable and growing profit for Twitter. Facebook had almost a billion users when they went IPO. That was nearly at the peak, but Twitter with only 250 million users have plenty of room to develop their business for the future.
But keep in mind that Twitter can never be like Facebook anyway. This is two different things, used on two different ways with two different kind of customers/sort of people. Comparing them will be wrong in some ways. Facebook is for the mainstream, and Twitter is for the pro`s.
The younger generation would rather check Twitter for the latest news than reading the local newspapers. They use Facebook to look for entertainment, playing games and chat with friends. Twitter raised the IPO share price to a range of $23 to $25 per share yesterday. The offering size is 70 million shares. That is $2 billion if an overallotment option of 10,5 million shares is exercised.
Twitter IPO is more expensive than Facebook without profits. Facebook and LikedIn Corp trade at about 12 times forecast 2014 revenue, and Twitter will trade at about 12,5 to 13,6 times forecast 2014 revenue. The new price will value Twitter at up to $13,6 billion (revenue of $1 billion).
Twitter plans to close the books on the IPO on Tuesday at 12 p.m. EST (1700 GMT), a day earlier than scheduled. The IPO is set to price on Wednesday, and the shares will begin to trade on New York Stock Exchange on Thursday.
Buying stocks is fun, exciting and stimulating, filled with action. Other news today: ISM Non-Manufacturing PMI at 10:00am.
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Ket Garden
Shiny bull 