Twitter revealed its IPO filing last week, and a new report from Ironfire Capital LLC and Gamco Investors Inc. estimates the social network could hit a valuation of up to $20 billion post-IPO.
This is a significant increase from the $12.8 billion valuation determined from the value Twitter currently has on its shares.
Although the social network has yet to turn a profit, both firms believe as it grows further worldwide, it can attract more companies and, in turn, further increase revenue.
The valuation is fair despite the lack of quantifiable profit. I anticipate the revenue to grow exponentially as retailers and media begin to explore ways to attract new customers through the use of Twitter.
At the value Twitter has on its shares, it means it would be trading at 28.6 times revenue from the past year.
In comparison, Facebook trades around 20 times revenue and LinkedIn trades around 21 times revenue.
According to Eric Jackson, founder of Ironfire Capital, he believes that in a few years time, the social network could become a $40 to $60 billion company.
The sky is the limit for Twitter, and some individuals like portfolio manager Lawrence Haverty believe it could exceed a $20 billion valuation on the first trade.