Wedbush analyst Michael Pachter arrived at his $37 price target by assuming Twitter will double its 230 million monthly users to 460 million over the next five years while increasing the number of times users look at Twitter every day. Pachter estimates Twitter will deliver $3.5 billion in EBITDA — earnings before interest, taxes, depreciation, and amortization — by 2018.
"Twitter is likely in the early innings of its growth," Pachter wrote in a note to investors. "We believe that the majority of the world's 2.4 billion Internet users have great potential to find something or someone on Twitter that they are interested in."
San Francisco-based Twitter's stock fell $3.25, or 7 percent, to $41.65 in trading on Friday despite an uptick in the broader market.
The shares are still up 60 percent from the $26 IPO price Twitter and the IPO's underwriting bankers set Wednesday night. Twitter made $1.8 billion in the offering. On Thursday, the company's stock jumped 73 percent in its first day of trading, creating hordes of new millionaires —and even a few billionaires.
For some perspective, here's a look at how other prominent technology stocks did in the week following their IPO — and how they're faring now:
— Facebook Inc., the world's largest social network, first day of trading on May 18, 2012
Pricing: $38 per share
First-day close: $38.23, up less than 1 percent from IPO price
A week after the IPO: $31.91, down 16 percent from IPO price
Current 52-week range: $18.87 to $54.83
Friday: $47.64, up 25.4 percent from IPO price
— Zynga Inc., developer of online games, first day of trading on Dec. 16, 2011
Pricing: $10 per share
First-day close: $9.50, down 5 percent from IPO price
A week after the IPO: $9.39, down 6.1 percent
Current 52-week range: $2.09 to $4.05