Market Overview

Twitter Deal Unlikely, But Might Still Trade At An M&A Premium

Share:
Twitter Deal Unlikely, But Might Still Trade At An M&A Premium

Twitter Inc (NYSE: TWTR) shares moved up 20 percent on September 23 following press reports that the company had initiated discussions with several media and technology companies that could lead to a formal bidding process.

Citi’s Mark May maintains a Neutral rating on the company, with a price target of $16.

Rationale For M&A

“While we see some strategic rationale for certain companies to acquire Twitter, the company's struggles and steep valuation make a deal at a meaningful premium - especially from here - less likely in our view,” May mentioned.

The analyst believes that given the current share price, a potential bid could go up to $26, representing 15 percent upside.

Related Link: Disney Unlikely To Acquire Twitter Based On Past Deals

However, if a bid does not materialize, the stock is likely to decline to the lows seen in late May, given Twitter’s stagnant user growth, deteriorating financial and potential for further downside to the consensus expectations.

In the near term, however, May expects the stock to continue to trade at an M&A premium.

Bid Price

“Though a Twitter transaction does screen as being possible from a strategic and financial perspective, we would consider the valuation at $26 per share as being aggressive,” May went on to say.

The analyst believes a private equity transaction would be unlikely, given Twitter’s free cash flow is meaningfully supported by the company’s ability to use SBC as a currency, an ability that would disappear if Twitter is taken private.

Full ratings data available on Benzinga Pro.

Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email feedback@benzinga.com with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!

Latest Ratings for TWTR

DateFirmActionFromTo
Nov 2019MaintainsMarket Perform
Nov 2019DowngradesIn-LineUnderperform
Oct 2019MaintainsHold

View More Analyst Ratings for TWTR
View the Latest Analyst Ratings

Posted-In: Citi Mark MayAnalyst Color News Reiteration Analyst Ratings Movers Tech Best of Benzinga

 

Related Articles (TWTR)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
ARAVH.C. WainwrightReiterates31.0
QCOMCascendReiterates110.0
KMPHH.C. WainwrightReiterates2.5
HASusquehannaInitiates Coverage On27.0
BFRABenchmarkMaintains18.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com

FactSet's Stock Under Selling Pressure Following Q4 Results

Eli Lilly Is Entering A Period Of Accelerated Growth; Goldman Upgrades Stock To Buy