Sell-Side Sentiment On Twitter Following Buyout Chatter Has Not Been Positive

The initial report last Friday singled out salesforce.com, inc. CRM and Alphabet Inc GOOG GOOGL as potential buyers, but since then, Microsoft Corporation MSFT and Walt Disney Co DIS have all seen their names thrown into the mix.

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Twitter's stock fell by more than 3 percent on Wednesday, a notable move since the major indices ended the day notably higher, including a triple-digit point gain for the Dow Jones Industrial Average. It is possible that investor optimism over a deal has faded — a sentiment that Wall Street analysts mostly never shared in the first place.

Here is a summary of what Wall Street has been saying this week.

Loop Capital

Blake Harper of Loop Capital argued that while Twitter could eventually be bought out, a meaningful premium relative to its current price is "unlikely." As such, there is "more downside risk if a deal falls through."

Mizuho

Neil Doshi of Mizuho stated that Twitter's stock is overvalued and the company's fundamentals have "deteriorated significantly" over the past year. He further noted Twitter is now delivering revenue growth at one third of the pace it has a year ago and is growing at a slower rate than its peers.

Citi

Citi's Mark May said that while there is some strategic rationale for certain companies to buy Twitter, the social media's "struggles" and "steep" valuation makes a deal "less likely," especially at a premium to its current valuation.

SunTrust

SunTrust Robinson Humphrey's Bob Peck noted that Twitter's valuation has decoupled from its fundamentals and the takeover reports have created an unequal risk to reward profile. He also stated that if Twitter clarifies that it isn't for sale, shares could return to the $18 level.

Standpoint

Standpoint Research's Ronnie Moas argued that Twitter's stock could trade in the high 20s if it does sell itself, but in the meantime, shares are up 28 percent since Moas recommended buying the stock in January. He suggested investors take the profit now and not sit around to wait and see what happens.

Cowen & Co

Global Equities Research

Oppenheimer

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John Blackledge of Cowen & Co told CNBC that Twitter's woes are "well publicized." He also questioned how Alphabet's investors would react to the company using a big chunk of cash hoard to buy Twitter.

Trip Chowdhry of Global Equities Research has an interesting take. He warned of a looming startup bubble that will begin to burst in March or April of next year, and if Twitter doesn't find a buyer now, it will be "very difficult" to sell itself for even $10 a share late next year.

Jason Helfstein of Oppenheimer thinks that if an acquisition of Twitter actually takes place it won't have much of a premium attached to the current valuation. Nevertheless, the odds of an acquisition occurring in the first place is very low given a lack of meaningful increase in engagements due to the Olympics and its streaming NFL games.

At time of publication, Twitter was up 1.4 percent at $23.24.

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