Twitter Inc (NYSE:TWTR)’s valuation and future growth potential are impressive, but the current price, which is trading at 20.4x EV/Revenue and 173.2x EV/EBITDA, already reflects much of that potential, according to a report from Cantor Fitzgerald by analyst Youssef Squali, Naved Khan and Kip Paulson. In comparison to Twitter, Facebook Inc (NASDAQ:FB) is trading at 9.9x EV/Revenue and 16.8x EV/EBITDA using financial year 2014 estimates. At current valuations, analysts favor Facebook over Twitter.

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Twitter Vs. Facebook

According to analysts, to remain at current valuation Twitter Inc (NYSE:TWTR) needs to post an increase in revenue and EBITDA at over 60% and 100% annually for five years. Monthly average users should be 850 million by 2019 compared to 232 million presently, and monetization of $17/MAU compared to $2.30 currently. Analysts suggest that the numbers are not impossible for Twitter, but it would be too early to credit Twitter, as of now.

Twitter’s user base is expanding at an increased pace compared to Facebook. The Twitter user base is growing by over 38.9% year on year compared to 18.1% for Facebook, but the microblogging site has yet to achieve the mass appeal that the social networker already has. Twitter is a social networking platform for influential and well-connected individuals, but as of now, has failed to “become a daily habit for the masses.” This will not change for several quarters, according to the analysts.

Total minutes spent on Facebook came in at 150.0 billion in September 2013 compared to 7.8 billion of Twitter Inc (NYSE:TWTR). On the basis of time spent per-visitor; Facebook enjoys a massive lead with 846.1 minutes versus Twitter’s 124.6 minutes. User engagement will work in favor of Facebook until the minute gap bridges. The gap will also “limit” Twitter’s ability to monetize its user base entirely.

Early investors gain from Twitter

Those venture capital firms who were early investors in Twitter earned a good deal of money. Early partners were Spark Capital, Union Square Ventures, Benchmark Capital and Charles River Ventures. Investors who invested later also earned hundreds of millions of dollars with the issue of the IPO. Later Investors include DST Global, Kleiner Perkins and JPMorgan, as well as angel investors like Rizvi Traverse, Chris Sacca, Jim Clark, Marc Andreessen, Naval Ravikant, Ron Conway and Jeff Bezos.

Analysts at Cantor Fitzgerald have downgraded Twitter Inc (NYSE:TWTR) from Buy to Hold with a price target of $32.00.