It has been only four days since Twitter first took the wraps off its initial public offering prospectus. But that hasn’t stopped Robert Peck from setting a high $ 50-a-share price target on the still-private social network.
Mr. Peck, of SunTrust Robinson Humphrey, was the first research analyst to set a public target on Twitter’s not-yet-public stock. But by the time the regulatory filing came out, he had already conducted what he described as several months’ worth of work: talking to industry contacts, marketers and others.
Still, going first wasn’t the aim, he said in an interview.
“It wasn’t the main reason we did it, but it was a nice sort of benefit,” Mr. Peck told DealBook.
Instead, he wanted to use what even he would concede was limited information to decide whether Twitter was a worthwhile investment. What he concluded was unambiguous: His note set a $ 50 price target for Twitter, more than double the $ 20.62 at which the company itself valued its stock in August. That would value the company at around $ 31 billion on a diluted basis, up from nearly $ 13 billion now.
For Mr. Peck, the decision was based on the sense that Twitter has room to grow. Despite recording a net loss for the 12 months through the end of June, the company has been spending significantly on new tools like Vine, a short-video platform, and MoPub, a big advertising exchange.
“It reminds me of Facebook when they had just rolled out a bunch of new products that hadn’t shown up in the financials yet,” he said in the interview. “I like to see those investments in the platform.”
In his note, Mr. Peck argues that Twitter is a unique platform that isn’t quite like Facebook. Instead, it lets users broadcast their interests, 140 characters at a time, while also conversing with others. And it supplements other media like TV, as users comment on TV shows like “Breaking Bad” in real time.
The research note concedes that Twitter’s future is hard to determine. In discussing how big the company’s sales could become, Mr. Peck writes, “This is so hard to estimate because it requires thinking about what future businesses the company might enter, not merely extrapolating the current businesses. For example, before 2007, did investors think Apple would have a phone, let alone a tablet?”
That said, the analyst believes that the social network will become more mainstream. “They’ll make it so your mom can go to Twitter,” he said.
How did Mr. Peck arrive at $ 50 a share? He pointed to Twitter’s own internal stock valuation and calculated what sort of premium those shares would fetch were they traded publicly, arriving at about $ 26. He then noted speculation that the company will seek to price its I.P.O. at about $ 28 to $ 30 a share, what he deemed a reasonable range.
“I think $ 50 provides a reasonable target,” he said.
But skeptics have already noted that the growth of Twitter users in the United States, its biggest and wealthiest market, has slowed. And the company’s monthly user base of about 218 million is a fifth of Facebook’s.
Mr. Peck concedes those concerns and aid that the prospectus still has a few question marks. But he added that the company appears to have cracked the all-important mobile component of social networking, with two-thirds of its revenue coming from mobile advertising.
Ultimately, he said, potential buyers will have to make up their own minds.
“It’s a great opportunity for investors to do their homework,” he said.