Shares of Twitter Inc. (TWTR - Analyst Report) surged 21.4% to close at $22.62 on Friday after media reports indicated that the company’s board was “moving closer to sale”. Twitter did not comment on the matter.
It was the first time that media reports indicated that Salesforce.com (CRM - Analyst Report) may be interested in snapping up Twitter. Founded in 1999 by Marc Benioff, Salesforce is the leading provider of on-demand Customer Relationship Management software.
Per media reports, Salesforce is eyeing Twitter’s valuable data. Salesforce earlier this year had made an unsuccessful attempt at buying LinkedIn. The latter was picked up by Microsoft in a record $26 billion deal. Analysts estimate that a similar multiple could put a $16 to $30 billion tag for Twitter. With Salesforce reportedly inking nine acquisition deals including that of MetaMind, and BeyondCore so far, this could be a pocket pincher, especially for a company that has been long troubled. Shares of Salesforce fell 5.6% following the rumors on Friday.
Twitter’s problems are just too many. Just 313 million users can’t exactly be called an impressive number. Plus, it is yet to earn profits in its decade long existence. To add to its woes, the performance of its brand advertising businesses hasn’t been as expected in the last two reported quarters marred by increasing competition. Brand marketing is one of the primary contributors to the company’s revenues. Trolling is another menace that Twitter is fighting hard to get rid off but to no avail. Its shares have tanked over 11% in the past one year.
To fight the odds, Twitter has been focusing on “live” and recently live streamed a NFL match garnering over 2 million viewers at peak. This year, it has signed a variety of streaming deals with the likes of NHL, NBA, Bloomberg, Cheddar, CBSN, and more. Moreover, to bring in more users for its NFL live stream, Twitter launched an app for Apple TV users worldwide and in select markets for Amazon Fire TV and Xbox One users.
Twitter is making some changes to its platform to make it more user friendly. Recently, the company announced that it has changed the way it counts 140 characters by doing away with calculating media attachments and @names in the count. This enables users to express more in tweets.
We have to add that steps like the focus on “live” and changes to its platform, though heading in the right direction, haven’t had a favorable impact on its financial performance yet. This isn’t a good sign because investors are losing patience. In fact, Twitter’s elusive turnaround has many questioning the standalone status of the company, which has resulted in numerous buyout rumors this year.
Several names have cropped up as possible buyers, including Alphabet (GOOGL - Analyst Report) , Microsoft and Facebook. Alphabet is generally viewed as the most likely suitor given its diverse platforms that could make the integration of Twitter easy. Notably, Twitter has an arrangement to include tweets on Google’s search engine results page. Per a Business Insider report, an analyst observes that Twitter could well be a strategic fit for media giant The Walt Disney Company (DIS - Analyst Report) , given its efforts toward sports live streaming.
At present, Twitter is a Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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