Twitter May Be Expensive, But Goldman Says Buy Anyways
The required quiet period has ended, and now the banks that underwrote Twitter’s (NYSE:TWTR) initial public offering are free to share their take on the stock. Before the end of the quiet period, 16 brokers averaged a fairly neutral outlook on the stock with a $38.63 median price target, suggesting about a 7 percent downside over the next year. The opinions released on Monday mostly echo this mixed position.
Goldman Sachs (NYSE:GS), the lead underwriter on the IPO, initiated coverage of Twitter at a Buy with a $46 price target. In a note seen by Street Insider, Goldman analyst Heath Terry highlighted the firm’s strong and rapidly growing user base and apparently competent monetization strategy. The analyst is forecasting fiscal 2013 earnings of -$3.37 per share and fiscal 2014 earnings of -71 cents per share. Goldman’s estimates are consistent with previous estimates calling for positive earnings by 2015.
Other banks on the bullish bandwagon include Deutsche Bank, which initiated covered with a buy and a $50 price target, despite the fact that shares are “very expensive” at a trailing price-to-sales ratio of 42.37. This compares to Facebook (NASDAQ:FB) with a trailing P/S of about 16.6.