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Twitter Shares Rebound as Deal with Salesforce Still Possible

Tuesday, October 11, 2016 6:41
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(Before It's News)

Twitter app logoThe see-saw action of social media giant Twitter Inc (NYSE:TWTR) continued this morning, with news breaking that the company could still potentially strike a buyout deal with Salesforce.com.

This news contradicts a weekend report that indicated all potential buyers had dropped out of the running. From the Wall Street Journal:

Over the last week, Twitter’s fate has appeared to be murkier than ever. The troubled social media company, which has been engaged in talks to sell itself, seemed to be running out of potential buyers.

But inside Twitter, executives are continuing deal talks with at least one suitor, the online software company Salesforce.com, according to two people involved in the discussions who spoke on condition of anonymity because the strategizing is private. The talks are continuing even though Salesforce has faced pushback from some of its biggest investors over a potential acquisition.

One thing we can be reasonably certain of at this point is that Twitter is unlikely to fetch its reported initial $30 billion asking price. The company’s market cap currently sits around $11 billion, so even a 100% acquisition premium wouldn’t come close to that figure.

CEO Jack Dorsey has reportedly had a change of heart about selling the company. Initially resistant to a sale, which he feared would result in the firm being broke up and sold for parts, “is now not averse to selling the company as long as it is what is best for the integrity of the product,” according to the WSJ.

Analysts at Deutsche Bank remain bullish on the stock, regardless of whether or not a deal gets done. The firm reiterated its Buy rating this morning and well as its $22 price target:

Amidst intense volatility around whether TWTR is acquired or not, we shift back to what we can track, ie – the fundamentals. Our checks point to a “high-end of the range” revenue print from TWTR with “slightly up” MAUs for 3Q, and we think 4Q guidance could meet/exceed consensus for the first time in a year. The NFL live video project is the first major new initiative that has been by all accounts a smashing success (revenue and overall experience) for Twitter in the past couple years, hence mgmt’s tone should remain upbeat. At $17, shares are back to levels before the M&A speculation began, and represent a good risk/reward considering our expectations for the 3Q print.

Investors can expect continued volatility in Twitter shares for the foreseeable future, with user growth stalled and a sale seemingly the only viable option to restore the company to glory.

TWTR-2016-10-11

Twitter shares rose $0.59 (+3.36%) to $18.15 in Tuesday morning trading. Year-to-date, TWTR has plunged 24.11%.

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