Is Twitter Inc an Acquisition Target?
Twitter Inc (NYSE:TWTR) has enjoyed a good rally since June. From June 13 to July 12, Twitter stock has gained almost 25%. The company’s first-quarter results, marked by lower advertising revenue, had a heavy impact on Twitter. Still, Twitter stock has recovered from its slump and its second-quarter results due July 26 could have some favorable surprises.
The key to Twitter stock is the growth in the number of its users—that’s what is going to decide how TWTR stock behaves.
An analyst at Canaccord Securities, Michael Graham has kept his cool, dismissing the fears over Twitter stock. Based on the tracking of 75 countries, Graham expects Twitter will meet its four-million-users target.
Graham, however, does not completely absolve Twitter of its past errors. He remains wary over how Twitter stock will behave, given that advertising on the site may fail to meet expectations.
Still, the second half of 2016 could be an exciting period for Twitter, given the presidential elections, the Rio Olympics, and the agreement that Twitter has reached with the National Football League (NFL). Given that TWTR stock was trading at more than $18.00 per share today, a price target of $20.00 is more than realistic. (Source: “Despite the negative sentiment regarding Twitter, the sell side firm sees MAUs expanding during Q2,” The Country Caller, July 12, 2016.)
Indeed, Twitter has already signed streaming agreements with the TV network CBS for the forthcoming big Democratic and Republican conventions. It has also signed a deal with Bloomberg Media. (Source: “Can Twitter’s Streaming Deals Fuel a Long-Awaited Rebound?,” The Street, July 12, 2016.)
This year’s political conventions, given the controversy surrounding both major presidential candidates, Donald Trump and Hillary Clinton, will likely attract more followers than ever. Twitter’s increasing use of the livestream content platform could be what it needs to bring more visitors to the site and increase advertising revenue.
It is unlikely that Twitter stock will hit the $30.00 mark, returning shares to their same year-ago value. Still, the stock has potential. The past few weeks of trading have no doubt warranted some optimism, even if only of the cautious variety, as the company has shown an ability to survive in a tough environment. This is thanks to its unique proposition and content, which set the stage for the most bullish Twitter scenario—its potential as a takeover target.
The speculation over a possible Twitter acquisition by a major player like Alphabet Inc (NASDAQ:GOOG) or even Facebook Inc (NASDAQ:FB) will continue. Doubtless, that kind of speculation has contributed to Twitter stock’s month-long rally since Microsoft Corporation (NASDQ:MSFT) acquired LinkedIn at a price most analysts considered exorbitant. Still, the Microsoft/LinkedIn deal, if nothing else, has shown that there is still appetite for enthusiasm and big deals.
The deal has also brought to attention the fact that it’s all about user numbers. Twitter can certainly contribute big user numbers to any buyer, being the only major independent social network left. Facebook has grown beyond reason and beyond anyone’s ability to grab. If anything, it’s going to be the grabber. This leaves Twitter, floating alone in an ocean with fewer interesting prey to catch.
Twitter can contribute an instant 300 million active worldwide users. Twitter has also proven to be one of the key engines of social media. The problem is that while Twitter is an attractive target, the potential buyer has to figure out how best to integrate Twitter’s assets into its core business. (Source: “Twitter’s CEO Jack Dorsey on Q2 2015 Results – Earnings Call Transcript,” Seeking Alpha, July 28, 2015.)
The major takeaway for Twitter is that it is growing. Five million users have joined the platform during the 1Q15–1Q16 period. (Source: “Twitter Q1 2016 Shareholder Letter,” Twitter Inc, April 26, 2016.) If nothing else, the company’s next quarterly results will be better as the growth will help boost its advertising revenue.