Twitter Inc (NYSE:TWTR) has earned a trifecta of comparatively positive analyst notes today amid a report that all is not lost in terms of a takeover. While it had been reported that all potential suitors had bowed out of the takeover talks, a later report indicated that Salesforce is still in. Meanwhile Evercore ISI analysts have upgraded Twitter, Deutsche Bank analysts say they expect the company to beat earnings estimates, and Canaccord Genuity analysts expressed optimism over the company’s live-streaming opportunities.
Evercore ISI upgrades Twitter stock
Evercore ISI analyst Ken Sena said in a report on Tuesday that he has upgraded Twitter from Sell to Hold, but maintains his $17 price target. His reason for the upgrade is the recent plunge in the stock, which carried it down to near his price target. Additionally, he believes that Twitter may beat its guidance for the third quarter due to the first presidential debate, the NFL Thursday Night game live-streams, and the Olympics.
Deutsche Bank analyst Ross Sandler said in his report on Monday that he believes Twitter will beat consensus estimates for the third quarter. He expects the company’s results to come in toward the high end of the guided range for revenue. Twitter is scheduled to release its earnings report on Oct. 27. Sandler also reiterated his Buy rating on the stock.
Will live-streaming reverse Twitter’s fate?
Canaccord Genuity analyst Michael Graham, who has a Hold rating and $16 price target on the stock, expressed a similar sentiment around the live streams for the NFL Thursday night games, although his report was less positive than the first two. He expects “very modest” monthly active user growth based on his sampling, possibly below his estimate of 4 million. He adds that Facebook users engaged with the games more even though they didn’t have the live-stream.
He expects the user experience to change, although he found it to be mostly positive. He would like to see improvement in the filtering of tweets.
Advertisers may flee Twitter
Graham thinks it would make sense for Twitter to be sold and that there should be interest, but he believes the board will stick to a price tag of $26 per share. In order to reach this price, he suspects a bidding war would be needed, although that seems unlikely, based on media reports. He doesn’t believe the takeover talk is good for the micro-blogging platform’s ad business because he thinks advertisers might be growing concerned about what will happen.
What’s even worse is that competition for digital ad dollars is increasing, so he suggests that brand advertisers may not only be spooked by the takeover rumors but also see Snapchat or other social networks as better options.
Will Twitter be acquired?
So what are Twitter’s chances of even being able to strike a deal? If Salesforce is the only interested party, then an important consideration is whether a deal would even be a good idea. Bloomberg’s Tara Lachapelle ran the numbers, and while she notes that logic may still be lacking in a strategic combination, acquiring the micro-blogging platform might still be accretive to Salesforce’s earnings next year—even with a 30% premium. Of course the company’s size would mean it would have to issue stock to pay for it because it only has about $1 billion in cash.
If the company really ends up striking a deal, Bronte Capital’s John Hempton suggests that it might not be Salesforce or another strategic acquirer that steps in. Instead, he sees a private-equity buyer as being more likely. He said in a blog post that if this comes to pass, he believes CEO Jack Dorsey will be fired and that there could be hundreds or even thousands of other workers who get the ax as well.
He sees the business as being unsustainable—largely because of the huge amounts of stock-based compensation it hands out. A large chunk of its losses are a result of all those equity awards to employees. He also thinks a private-equity buyer would be more willing to do what’s needed to turn the company around because a strategic buyer such as Salesforce doesn’t want to deal with such a huge mess.
Twitter shares climbed by as much as 1.37% to $17.80 during regular trading hours on Tuesday.
