Finally – It’s Time For The Twitter IPO

| September 20, 2013 | 0 Comments

After months of speculation, micro blogging site Twitter finally filed for an IPO.  The ultra-popular site has been the subject of IPO and acquisition rumors since the reemergence of big name internet IPOs.

So, it’s big news now that the much anticipated IPO has finally been announced.

Twitter is probably the biggest name internet stock left yet to dip into the pool of publicly traded companies.  While the company doesn’t have the audience of Facebook (FB), it’s still a widely used and influential site.

In fact, Twitter has an estimated 240 million active users.  And, it’s become one of the most ardently followed sources of breaking news.  That includes everything from financial and political news to entertainment and sports.

The large following is enabling Twitter to pull in robust revenues from advertising.  In fact, the company is expected to take in $600 million this year.  And, the number is projected to jump to $1 billion next year.

Here’s the thing…

Investors are still leery about diving into internet company IPOs after the Facebook IPO debacle.  Remember, along with a host of other problems, FB was priced way too high initially.  It took over a year before the stock finally climbed higher than the opening day price.

But that’s where Twitter has a big advantage.  Unlike FB at the time of its IPO, over half of Twitter’s revenues come from mobile ads.

You see, mobile ads are where the money is in internet advertising.  Traditional internet advertising has already peaked.  Companies are now trying to figure out the best way to reach smartphone and tablet users.

Twitter’s format is ideally suited for smaller screens, so it’s in good position to capitalize off the growth in mobile advertising.

Plus, Twitter has the ability to sell meta-data regarding the behavior of its massive user base.  That sort of information is invaluable to marketers.

Finally, Twitter management is striking while the iron is hot.  After months of struggling, many public internet companies are now thriving.  Facebook is a perfect example of the turnaround occurring in the industry.

So, now the question is, how high should Twitter be valued?  Early indications have the company’s valuation at roughly $15 to $20 billion.  That’s the range I’d expect the IPO to fall into.

Now, options won’t be available on Twitter until after the IPO, but FB options may serve as a decent proxy in the meantime.  FB should get a boost from a successful Twitter IPO.  Stay tuned.

Yours in Profit,

Gordon Lewis

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Category: Stocks

About the Author ()

Gordon Lewis is the Chief Investment Strategist and editor for the popular daily newsletter – Options Trading Research. He’s also one of the key analysts behind the highly successful Options Trading Wire and Advanced Options Adviser. As a market maker on the floor of the CBOE, Gordon analyzed and traded stocks and options across a broad range of market caps and industries including retail, internet, oil, insurance, and telecom. He often traded thousands of options contracts per month… and it’s fair to say, Gordon’s analyzed and invested in some of the most complex and successful options strategies in the world.

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