Most Wall Street analysts wait for a company’s IPO to actually price and then start trading before they issue Buy, Sell, or Hold recommendations (or other recommendations). This is not the case for Twitter as Sterne Agee’s Arvind Bhatia and Brett Strauser initiated coverage of Twitter with upside price targets that would translate to a “Buy” rating if the IPO came out right in its expected price range.

The Sterne Agee team did not establish any formal rating or price target yet. It is the tone of this report that sounds so positive, and they have opined that shares would be attractive if the IPO prices in the $17 to $20 proposed range.

Twitter’s IPO is expected to hit in the first week of November. The team’s valuation work suggests a base case valuation of $25 to $32 per share in the next 12 months to 24 months. The upside case is a value of $33 to $48 per share, versus a downside case of $13 to $15 per share. Again, this is a call for the next 12 months to 24 months.

Twitter was shown to have some 232 million monthly active users, including 53 million in the U.S. Mobile accounts for 76% of the monthly active users, and over 70% of the advertising revenue was from mobile in the most recent quarter. The social network’s international user base represents 77% of the total but that same international group accounts for only 25% of the revenue.

The Sterne Agee team called the valuation proposal, “Twitter’s scale and deeply engaged user base create valuable opportunities for advertisers to leverage the platform. Advertisers can communicate directly with their followers for free, or they can purchase Twitter’s advertising services to reach a broader audience. Twitter’s platform partners include publishers, media, outlets, and developers, who have integrated with Twitter through an application programming interface, which allows them to seamlessly leverage Twitter as a complementary distribution channel for their content. Twitter plans to continue to integrate more content into their API to allow platform partners to distribute more forms of content.”

Another issue pointed out is that 11% of Twitter’s revenue came from Data Licensing. This is where it provides data partners with detailed historical and real-time analytics regarding total user interactions with the platform. Only five of the top data partners generated about 73% of the data licensing revenue in the first 9 months of 2013.

Twitter plans to issue 70 million shares, or up to 80.5 million shares if you include the overallotment shares for the underwriters. This would generate a capital raise of $1.2 billion to $1.6 billion before fees.

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