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Twitter Inc might discuss the option of selling itself at tomorrow’s board meeting as reported by Recode. Shares were up nearly 2% to $19.93 yesterday.
The buyout rumors have been around for quite some time now. Twitter at present is going through one of the toughest phases since its inception. Though founder Jack Dorsey’s return to the helm was widely cheered by investors, so far, he has not been able to mitigate Twitter’s problems.
This time around, the rumors carry some credibility. Last week, co-founder Evan Williams, while talking to Bloomberg TV, said that "We’re in a strong position now, and as a board member we have to consider the right options” when asked about Twitter’s standalone status. Following the interview, Twitter shares jumped 6%.
Wall Street is abuzz that Twitter might finally consider a sale, much to the delight of investors who are running out of patience now. Twitter, considered to be the next Facebook at its IPO in Nov 2013, has fared miserably. User growth hasn’t been impressive and it still remains a “no-profit” organization.
To add to its woes, the performance of Twitter’s brand advertising businesses hasn’t been as expected in the last two reported quarters. Brand marketing is one of the primary contributors to the company’s revenues. In the last reported quarter, the company said that brand advertising demand was again lower than expected due to increasing competition. Also, a mass exodus of employees from the higher rungs of Twitter’s management is unnerving.
Shares have tanked over 29% in the past one year and are trading way below its IPO price of $25.94. However, Twitter has taken various measures to boost its performance, which include a number of live streaming deals with the likes of NFL and NBA. Moreover, the company has now changed the way it counts 140 characters by eliminating media attachments and @names, thus enabling users to express more in tweets.
However, analysts are of the opinion that the search for a prospective buyer has been made difficult by the company’s hefty price tag. Recode reported that a potential acquirer needs to shell out $18 billion for Twitter based on the multiple used by Microsoft (MSFT - Free Report) to acquire LinkedIn for $26 million. Its dwindling revenues and lack of profit further complicate the situation.
Another set of layoffs similar to last year 8% reduction in workforce could make Twitter more attractive, adds Recode. Twitter has over 3,860 employees and pays over $168 million in stock-based compensation. Also, divesting units like Vine and MoPub will increase its appeal to buyers.
There have been several names listed as possible buyers including Alphabet (GOOGL - Free Report) , Microsoft and Facebook. Facebook is busy with innovations and after LinkedIn, Microsoft might not go for another high profile takeover in the near term. So, Alphabet emerges as the most likley suitor. Notably, Twitter has an arrangement to include tweets on Google’s search engine results page.
At present, Twitter carries a Zacks Rank#3 (Hold).
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Twitter (TWTR) Buyout Rumors Surface Again, Stock Gains
Twitter Inc might discuss the option of selling itself at tomorrow’s board meeting as reported by Recode. Shares were up nearly 2% to $19.93 yesterday.
The buyout rumors have been around for quite some time now. Twitter at present is going through one of the toughest phases since its inception. Though founder Jack Dorsey’s return to the helm was widely cheered by investors, so far, he has not been able to mitigate Twitter’s problems.
This time around, the rumors carry some credibility. Last week, co-founder Evan Williams, while talking to Bloomberg TV, said that "We’re in a strong position now, and as a board member we have to consider the right options” when asked about Twitter’s standalone status. Following the interview, Twitter shares jumped 6%.
Wall Street is abuzz that Twitter might finally consider a sale, much to the delight of investors who are running out of patience now. Twitter, considered to be the next Facebook at its IPO in Nov 2013, has fared miserably. User growth hasn’t been impressive and it still remains a “no-profit” organization.
To add to its woes, the performance of Twitter’s brand advertising businesses hasn’t been as expected in the last two reported quarters. Brand marketing is one of the primary contributors to the company’s revenues. In the last reported quarter, the company said that brand advertising demand was again lower than expected due to increasing competition. Also, a mass exodus of employees from the higher rungs of Twitter’s management is unnerving.
Shares have tanked over 29% in the past one year and are trading way below its IPO price of $25.94. However, Twitter has taken various measures to boost its performance, which include a number of live streaming deals with the likes of NFL and NBA. Moreover, the company has now changed the way it counts 140 characters by eliminating media attachments and @names, thus enabling users to express more in tweets.
TWITTER INC Price
TWITTER INC Price | TWITTER INC Quote
However, analysts are of the opinion that the search for a prospective buyer has been made difficult by the company’s hefty price tag. Recode reported that a potential acquirer needs to shell out $18 billion for Twitter based on the multiple used by Microsoft (MSFT - Free Report) to acquire LinkedIn for $26 million. Its dwindling revenues and lack of profit further complicate the situation.
Another set of layoffs similar to last year 8% reduction in workforce could make Twitter more attractive, adds Recode. Twitter has over 3,860 employees and pays over $168 million in stock-based compensation. Also, divesting units like Vine and MoPub will increase its appeal to buyers.
There have been several names listed as possible buyers including Alphabet (GOOGL - Free Report) , Microsoft and Facebook. Facebook is busy with innovations and after LinkedIn, Microsoft might not go for another high profile takeover in the near term. So, Alphabet emerges as the most likley suitor. Notably, Twitter has an arrangement to include tweets on Google’s search engine results page.
At present, Twitter carries a Zacks Rank#3 (Hold).
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>