DOWNLOAD @ wallstreethacks.com The following is a Discounted Cash Flow Analysis of Twitter (TKR: TWTR). The model is a template and assumptions can easily be edited to derive different equity values. Based on data from the S1 filing and our own assumptions; the model shows a share price of $11.84 or a company equity value of $7.4 Bil. http://wallstreethacks.com/downloads/twitter-twtr-dcf-valuation-model-xlsx/

1. TWTR Discounted Cash Flow (DCF) Analysis
DCF Valuation Model
11.07.13
Historical
(USD in '000s, except p/share units)
2010A
2011A
28,278
Revenues
2012A
316,933
2013E
550,000
2014F
901,068
2015F
2016F
2017F
2018F
1,388,753
1,952,479
2,546,895
3,183,618
276.0%
198.1%
73.5%
63.8%
54.1%
40.6%
30.4%
Cost of revenues
61,803
128,768
213,718
334,173
490,434
654,923
809,188
955,085
% of revenues
152.7%
58.1%
40.6%
38.9%
37.1%
35.3%
33.5%
31.8%
44,510
188,165
336,282
566,896
898,319
1,297,556
1,737,706
2,228,533
-52.7%
41.9%
59.4%
61.1%
62.9%
64.7%
66.5%
68.2%
70.0%
52,589
171,921
265,248
420,256
622,891
858,889
1,065,351
1,204,223
1,273,447
186.0%
161.7%
83.7%
76.4%
69.1%
61.8%
54.6%
47.3%
40.0%
29,348
80,176
119,004
185,848
270,613
364,885
439,624
477,749
477,543
103.8%
75.4%
37.5%
33.8%
30.0%
26.3%
22.5%
18.8%
15.0%
173.2%
48.4%
56.2%
45.6%
34.8%
20.5%
8.7%
3,183,618
30.0%
-14,890
Terminal Year
25.0%
43,168
0.0%
% of increase
Gross Profit
% of revenues
SG&A
% of revenues
R&D
% of revenues
-
106,313
Forecast
% of increase
Sales & Marketing
% of revenues
General & Administrative
6,289
25,988
86,551
138,916
209,101
293,783
372,982
434,283
24.4%
27.3%
25.3%
23.2%
21.2%
19.1%
17.1%
65,757
59,693
95,492
143,177
200,221
252,746
292,191
318,362
% of revenues
Depreciation and Amortization
% of revenues
EBIT
% of revenues
Income Tax
Effective tax rate
NOPLAT
% of revenues
(+) Dep. and Amort
% of Capex & R&D
(+/–) Chgs. in WC.
59.9%
61.9%
18.8%
17.4%
15.9%
14.4%
12.9%
11.5%
10.0%
-57,115
-103,219
-4,577
2,351
52,070
171,614
385,183
700,603
1,129,414
-202.0%
-97.1%
-1.4%
0.4%
5.8%
12.4%
19.7%
27.5%
35.5%
10,364
24,192
72,506
86,325
108,065
132,184
152,978
167,120
174,329
36.7%
22.8%
22.9%
15.7%
12.0%
9.5%
7.8%
6.6%
5.5%
-67,479
% of revenues
EBITDA
1,273,447
15.0%
16,952
2,228,533
477,543
22.2%
955,085
-127,411
-77,083
-83,974
-55,996
39,430
232,205
533,483
955,085
-238.6%
-119.8%
-24.3%
-15.3%
-6.2%
2.8%
11.9%
20.9%
30.0%
0.22
1.44
0.23
0.00
0.00
9,728
57,922
133,242
238,642
0.0%
0.0%
0.0%
0.0%
0.0%
24.7%
24.9%
25.0%
25.0%
-67,479
-127,412
-77,083
-83,974
-55,996
29,701
174,283
400,241
716,443
-238.63%
-119.85%
-24.32%
-15.27%
-6.21%
2.14%
8.93%
15.71%
22.50%
10,364
24,192
72,506
86,325
108,065
132,184
152,978
167,120
174,329
18.6%
17.0%
23.8%
19.8%
19.8%
19.8%
19.8%
19.8%
19.8%
0
381,236
-103,737
-334,587
70,214
97,537
112,745
118,883
127,345
1,129,414
174,329
955,085
716,443

2. TWTR Discounted Cash Flow (DCF) Analysis
DCF Valuation Model
11.07.13
Net Working Capital
167,088
% of increase
Free Cash Flow Firm (FCF)
444,587
590.88%
515.76%
140.28%
20.0%
20.00%
20.00%
20.00%
20.00%
20.00%
26,385
% of revenue
(–) Cap Ex.
548,324
61,983
185,574
250,000
275,000
302,500
332,750
366,025
402,628
134.9%
199.4%
34.7%
10.0%
10.0%
10.0%
10.0%
10.0%
-546,439
-293,888
-582,236
-83,500
110,000
180,214
277,751
390,496
509,379
636,724
-152,717
-43,078
107,256
320,219
615,489
8,792,701
Discount Period
1
2
3
4
5
5
Discount Factor
0.89
0.80
0.71
0.64
0.57
0.57
-136,354
-34,341
76,343
203,505
349,245
4,989,215
Present Value of FCF
Cumulative PV of FCF
458,398
Present Value of Terminal Value (TV)
4,989,215
Enterprise Value
5,447,613
Equity Value: WACC vs. Perpetual Growth Rate
DCF Valuation Assumptions
WACC
12.0%
11.0%
11.5%
12.0%
12.5%
13.0%
9,098,927
8,398,226
7,807,102
7,795,713
6,865,785
8,545,498
7,940,346
$7,423,317
6,976,749
6,587,399
4.5%
5.0%
5.5%
5.0%
Perpetual Growth Rate
8,077,213
7,547,878
7,090,702
6,692,122
6,341,765
Fair Value (1 yr forward)
PV of FCF
458,398
PV of TV
Equity Value per Share: WACC vs. Perpetual Growth Rate
4,989,215
Enterprise Value
5,447,613
11.0%
11.5%
12.0%
12.5%
13.0%
(–) Debt
0
5.5%
14.51
13.39
12.45
12.43
(+) Cash
1,975,704
5.0%
13.63
12.66
$11.84
11.12
10.50
Equity Value (100%)
7,423,317
4.5%
12.88
12.04
11.31
10.67
10.11
Basic Shares
474,697
Fully Diluted (FD) Shares
627,153
FD Equity Value per Share
Implied terminal EBITDA mulitiple
$11.84
7.8x
10.95

3. TWTR Discounted Cash Flow (DCF) Analysis
DCF Valuation Model
11.07.13
PV of FCF
Key Assumptions
Discount Period











1
Revenues for 2013 are $550 Mil. and the YoY increase falls to 25% by 2018
2
3
4
5
Total
Cost of revenues fall to 25% by 2018
13.0%
-135,147
-33,736
74,334
196,397
334,063
435,910
R&D as a % of revenues falls from 37.5% in 2012 to 15% in 2018
12.5%
-135,748
-34,037
75,329
199,911
341,553
447,009
Sales & Marketing as a % of revenues falls from 25% in 2012 to 15% in 2018
12.0%
-136,354
-34,341
76,343
203,505
349,245
458,398
G&A as a % of revenues falls from 199 in 2012 to 15% in 2018
11.5%
-136,966
-34,650
77,374
207,180
357,146
470,085
Statutory tax rate is 25%
11.0%
-137,582
-34,963
78,425
210,938
365,263
482,081
2013-18 forecast Dep & Amort. Is estimated as 19.8% of Capex and R&D exp.
Net Working Capital is estimated at 20% of revenues from 2013-18
Capex is forecast at increase by 10% each year from 2013-18
PV of TV
Perpetual Growth Rate
WACC of 12%
4.0%
Terminal growth rate of 5%
4.5%
5.0%
5.5%
6.0%
13.0%
3,711,809
3,930,151
4,175,785
4,454,171
4,772,326
12.5%
4,018,267
4,269,409
4,554,036
4,879,325
5,254,657
12.0%
4,365,563
4,656,600
4,989,215
5,373,001
5,820,751
11.5%
4,761,949
5,102,088
5,494,557
5,952,436
6,493,567
11.0%
5,218,040
5,619,428
6,087,714
6,641,142
7,305,256
Tax loss carryforward
516
Statutory Tax rate
25%
Fully-diluted No. Shares
Common oustanding post-IPO
474,697
Options at $1.84
42,709
RSUs
85,658
Conv. Preferreds at $.034
MoPub acquisition
116.512
14,791
New common shares 2013 Plan
Common issuable 2007 Plan
9,182
Common issuable under ESPP
Other
627,153
Tax Considerations
Yes