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

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

It has now been almost a full week since CNBC's David Faber reported that Twitter Inc (NYSE: TWTR) is engaged in discussions with potential acquirers over a sale of itself.

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

Related Link: Wall Street On Twitter Rumors: Stop Trying To Make Disney Happen, It's Not Going To Happen

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.

Related Link: Here's How To Play All Of These Twitter Rumors, According To Axiom's OptionsDesk

Cowen & Co

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.

Global Equities Research

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.

Oppenheimer

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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Latest Ratings for TWTR

DateFirmActionFromTo
Oct 2020WedbushMaintainsNeutral
Oct 2020JefferiesMaintainsHold
Oct 2020Morgan StanleyMaintainsEqual-Weight

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