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Twitter's NFL Deal Not A Huge Shock To PacCrest

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On Tuesday, it was announced that Twitter Inc (NYSE: TWTR) had won the rights to live stream the NFL's Thursday Night Football games, beating out the likes of Amazon.com, Inc. (NASDAQ: AMZN), Facebook Inc (NASDAQ: FB), Verizon Communications Inc. (NYSE: VZ) and Yahoo! Inc. (NASDAQ: YHOO).

While the NFL has shared that Twitter's approximated $10 million for the deal was not the highest bidder, some experts are still unsurprised by the resulting partnership.

Pacific Crest: Not A ‘Huge Shock'

Evan Wilson and Tyler Parker, analysts at Pacific Crest, explained why they don't see any surprises strategically from the deal.

Setting up the scene, the analysts explained why the deal is significant, regardless of what company won the partnership agreement.

"The company (Twitter) has had a heavy focus on video in the feed, and with the Periscope and Vine acquisitions, so this adds strategic content," the analysts mentioned. "The two companies previously did a ‘clips' deal. Verizon, Yahoo!, Amazon and Facebook were all participants in the bidding war according to Bloomberg, not to mention Alphabet (Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG)) has been interested in similar content in prior years. Twitter has been a part of the chatter, but consensus believed until recently that Facebook or Amazon were likely winners."

Related Link: NFL Is The Real Winner From Twitter Deal, Angel Investor Says

Supporting their case, the analysts listed two key takeaways:

  • "Twitter is the leading real-time global social platform."
  • "Its functionality is perfectly positioned for the shift of social to mobile, interested-based social space that is gaining share of time spent."

Will It Be Lucrative? Not Likely

The analysts shared their view that for Twitter, the deal is unlikely to have much effect on its user numbers or bring in much additional revenue. "We believe users who watch Thursday night football are highly likely to already be Twitter users, as the matchups on Thursday have historically been soft and for hardcore sports fans only. WE don't think casual Internet users, especially casual female users, which is what Twitter struggles with according to our surveys, will be attracted by the deal. It's also very U.S.-centric."

"We think it's very unlikely this deal can be profitable. We've seen more and more examples of escalating sales and marketing costs deleveraging models in the chase for user growth. We'd put this move in that category, which we don't expect the market to reward long term," the analysts concluded.

Pacific Crest currently rates Twitter at Sector Weight, with no attached price target.

Latest Ratings for TWTR

DateFirmActionFromTo
Oct 2019MaintainsEqual-Weight
Jul 2019MaintainsNeutral
Jul 2019Initiates Coverage OnNeutral

View More Analyst Ratings for TWTR
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