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Big assumptions for Twitter buyers: Analyst

Buying Twitter like a pro
Buying Twitter like a pro

To be a buyer of Twitter stock on the day of its initial public offering, investors have to expect strong results over the long term, SunTrust analyst Bob Peck said Thursday.

"To get an annualized return of about 20 percent, which is what investors look for, that implies stock doubling over three years," he said.

Estimated Twitter revenue of $2 billion for 2015 would have to grow 50 percent to reach $3 billion, then another 33 percent to hit $4 billion, Peck noted. A revenue multiple of 15 equals a market capitalization of $60 billion, divided by the number of shares, which would mean a share price of $90, he said.

Market totally sucks; Twitter is exciting: Pro
Market totally sucks; Twitter is exciting: Pro

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"One would need to assume that," he said. "We're not saying that will happen, but to buy it here one would need to make those assumptions."

Peck, who was the first Wall Street analyst to issue a "buy" rating on Twitter stock, had a price target of $50 per share.

On CNBC's "Halftime Report," he said that his price target was for the end of 2014 with a 17 multiple on $2 billion of revenue.

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The right price was elusive, Peck added.

"Right now it's so hard to gauge the true price because it's driven by supply and demand imbalances, so we'll see where it settles out," he said. "But if you are buying here, you do need to make those sort of assumptions, that it can get to $90 in three years."

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Peck also said that Twitter had room to improve its revenue-per-user metric.

"Don't forget they monetize at half the rate of Facebook in the U.S. and a third of the rate of Facebook internationally," he said. "So, a lot of room there on the RPU growth alone."

By CNBC's Bruno J. Navarro. Follow him on Twitter @Bruno_J_Navarro.