Jul 11, 2022

general Analysis

[4 min Read]

You are probably aware that** Twitter, Inc. (NYSE: TWTR)** is a leader in the Internet Content & Information space. In this analysis, we are going to look at some of the key financial ratios for Twitter, Inc. to determine a price prediction for TWTR. Remember these price predictions take into account several assumptions (which I will highlight) to determine a future price. I'll share my TWTR stock price prediction, then show you the approach and assumptions used to calculate the **TWTR stock forecast.**

Before we go any further, let me start by saying this, stock forecasting is hard. I don't know what the future will hold, and neither do Wall Street Analysts. If they could accurately predict the future, they would be able to beat the S&P 500 and I would be extremely wealthy. What I can say is that we can use available data to determine a reasonable TWTR stock forecast and helps us make better investment decisions, so hopefully, you find this analysis useful.

The Twitter, Inc. stock price prediction of $38.90 was derived from 2 main valuation methods (which are averaged for the final price target you see above). I'll dive into the approach to show you how I determined how I “predicted” a stock price of $38.90 for TWTR.

- Twitter, Inc. Financial Growth Metrics
- TWTR Comparable Companies Analysis

The Financial growth Metrics provide an analytics valuation approach to determining a reasonable TWTR stock forecast. The comparable companies analysis determines TWTR stock forecast by comparing TWTR's financial ratios to the average financial ratios of a group of similar stocks.

For this part of the analysis, I am looking at the history of key financial metrics for Twitter, Inc. to forecast the stock into 2022 and 2025. Most investors know that historical performance does not guarantee future performance, but it is useful to see how TWTR has been trending.

With** TWTR Forward Earnings Per Share has been estimated to be 1.31.** Additionally, TWTR's forward Price to Earnings Ratio is **40.31**. Since we have both TWTR's forward p/e and forward eps, we determine the TWTR stock forecast by multiple the P/E by the EPS to give us a stock price prediction of **$52.81 per share**

There are other ways to predict the price for TWTR but I would argue that P/E, EPS, and Earnings Growth are the most commonly used financial metrics by analysts and investors. This is why I used them to forecast TWTR's stock price.

In order to undergo a comparable analysis, we need to outline TWTR's main competitors. These competitors need to have; a stock, valid financial ratios, operations similar to TWTR, and a market cap similar to TWTR (if possible).

By keeping this in mind, I found the following list of companies to be some of TWTR stocks closest competitors:

TU, CHT, TLK, ORAN, LYV, TEF, RCI, TWLO, PINS, and SPOT

TWTR's D/E ratio is 1.29, compared to the average D/E ratio of TWTR's peers being 1.71. This implies that TWTR is undervalued and their share price should change by a factor of 32.08% to be at fair value (based on TWTR's D/E compared to the D/E of their peers).

TWTR's current PEG ratio is 1.91, compared to the average PEG ratio of TWTR's peers being 0.82. This implies that TWTR is overvalued and their share price should change by a factor of -56.96% to be at fair value (based on TWTR's PEG compared to the PEG of their peers).

TWTR's P/S ratio is 5.47, compared to the average P/S ratio of TWTR's peers being 2.74. This implies that TWTR is overvalued and their share price should change by a factor of -49.86% to be at fair value (based on TWTR's P/S compared to the P/S of its peers)

Overall, the TWTR stock price needs to drop (by an average of) -24.91% to be considered “at fair value”. Applying this percentage change to TWTR's current price of $33.28, implies a forecasted price of $24.99.

Analyst Ratings have provided a relatively strong indicator of future price movement, which is why they are used to (hopefully) support our TWTR stock forecast. There are a total of 42 analyst ratings for TWTR, which are distributed as follows:

11 Buys

28 Holds

3 Sells

Overall, the majority of analysts have given the TWTR stock a "hold" rating, which indicates that they think the TWTR stock is currently near its fair value. Factoring out these "hold" ratings, we can see that more analysts are bullish than not. Thus we can imply (from these ratings) that TWTR is under (but near) its fair value, which is the same conclusion that I was able to draw.

Should you buy TWTR? Well, based on the overall TWTR stock forecast of $38.90 per share, and the current price of TWTR, I would agree with the analysts and say TWTR is a narrow buy. Let me know what you think, happy to dive into other aspects of TWTR to help you make an informed investment decision.