Twitter Inc (NYSE:TWTR) has been in the spotlight since its initial public offering, and shares have soared since then. In fact, the stock went so high so quickly that analysts at several firms downgraded it in light of the exorbitant valuation. Pivotal analysts have bumped up their price target for the company, but they maintained their Sell rating because of the current share price.

Twitter Earnings

Adding MoPub revenue to Twitter estimates

Analyst Brian Wieser said he changed his expectations for Twitter Inc (NYSE:TWTR) slightly by adding incremental revenue from MoPub and modifying his estimates for cost of capital. As a result of the slight changes in his model, the analyst increased his price target for Twitter from $30 to $34 per share.

He now estimates that MoPub will generate an incremental $4 million for Twitter Inc (NYSE:TWTR) during the fourth quarter. That’s 4% growth based on Twitter’s revenues from the fourth quarter of 2012. After adding that in, he now estimates that the micro-blogging site will report $234 million in revenue for the December quarter. That’s a 109% year over year increase. For all of 2014, he estimates that Twitter will report $1.355 billion in revenue, which would be a 108% increase. By 2018, he estimates that MoPub will add $200 million in revenue to Twitter, bringing total 2018 revenues up to $4.9 billion.

Twitter shows “favorable trends”

The analyst said he still sees Twitter Inc (NYSE:TWTR) as a “stellar company with tremendous promise,” but at this point, he said the company’s current share price is difficult to justify. He notes that so far, Twitter has probably been impacted by limited float after the success of its IPO. He also said that based on the stock’s reactions to news events, shares seem to be driven by momentum rather than fundamentals. As a result, he thinks the high price of Twitter stock is unsustainable.

As a result, he thinks the high price of Twitter stock is unsustainable. He said in order to justify its share price, the company would have to reach $9 billion in ad revenue in 2018 without spending much on content or third-party publisher inventory.

Tags: