Twitter and Walt Disney do make for an odd couple, but on Monday, Bloomberg reported that Disney is considering bidding for the micro-blogging firm. Twitter’s list of potential buyers already includes names like Microsoft, Google and Salesforce.
A Twitter-Disney deal very unlikely
Disney has deep enough pockets to acquire the micro-blogging giant and an incentive to snap up a digital distribution channel, so any interest by Disney in the social media firm is not outlandish, notes the LA Times.
Companies like Disney, which has a big media empire that includes TV networks ESPN and ABC, are working to secure their digital futures as more and more people leave costly cable TV subscriptions and choose to consume entertainment from mobile devices and online streams. Buying the San Francisco-based company could give Disney a better distribution network for video content. However, Laura Martin, an analyst who covers Disney for Needham & Co., said it is unlikely.
“I think the traditional Disney shareholder would be really unsupportive of this acquisition.”
Disney has already bought top-tier content companies like Marvel Entertainment, Pixar Animation Studios and Lucasfilm for about $15.5.billion under the leadership of CEO Robert Iger. With a market capitalization of about $20 billion, Twitter could, however, be a more expensive acquisition target. In addition, the social network is not exactly a profitable company, so Disney will also have a risk on its hands if it acquires it, notes the LA Times. In the fiscal second quarter that ended June 30, the micro-blogging giant lost $107 million.
Martin said the social network cannot control who uses it, and that could create a really “damaging brand event for Disney Co.” Also the micro-blogging giant could lose support from other media companies which might view it as favoring more Disney content if it were owned by Disney.
In recent months, investors may have been looking forward to a potential sale of the micro-blogging giant, but one analyst thinks that everyone is in for some disappointment. In a note, Jason Helfstein of Oppenheimer Holdings downgraded the stock to Underperform following the 21% boost to its share price delivered by reports of a potential sale.
Helfstein established a new price target of $17 for Twitter “based on slowing user growth, poor product implementation/execution, decreasing user engagement, inferior advertising technology, platform safety issues, and strong competition.”
On Monday, Twitter shares closed up 3.32% at $23.37. Year to date, the stock is up more than 5%, while in the last year, it is down almost 8%.