Twitter Inc (TWTR) Stock Is the Surprise Loser of the AT&T-Time Warner Merger

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The big news in the market this week is AT&T Inc.‘s (NYSE:T) massive $85 billion buyout bid for Time Warner Inc (NYSE: TWX). The deal would certainly impact the telecom and cable TV markets, but Twitter Inc (NYSE:TWTR) and Twitter stock investors could end up as surprise losers as well.

Twitter Inc (TWTR) Stock Is the Surprise Loser of the AT&T-Time Warner Merger

It’s no secret that the biggest issue for TWTR stock in recent years has been disappointing user and ad revenue growth.

A while back, I wrote about one potential idea that Twitter has been pursuing lately: streaming live TV. While Netflix, Inc. (NASDAQ:NFLX), Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) and Amazon.com, Inc. (NASDAQ:AMZN) have all established dominant positions in the streaming video space, their one weakness is live TV.

Last year, Twitter has been dipping its toes into live streaming by signing sports deals with the NFL, MLB, NHL, Wimbledon and the NBA. TWTR’s live stream of the second presidential debate reached 2.5 million people as well.

This push into live streaming TV could mean that Twitter is making a move to compete with “skinny bundle” services like Sony Corp (ADR) (NYSE:SNE)’s PlayStation Vue and DISH Network Corp (NASDAQ:DISH)’s Sling TV. TWTR stock already has an inherent advantage over these fledgling services because its app is already installed on millions of devices worldwide.

AT&T Is Raining on the Twitter Stock Parade

Just when Twitter stock investors began to see a window of opportunity, AT&T is making a major move. Prior to the TWX announcement, AT&T had already announced plans to launch DirecTV Now by the end of the year. DirecTV Now is an over-the-top streaming TV service. Presumably, it will compete head-to-head with Sling TV and Playstation Vue. And of course, it will be competing with any streaming TV service TWTR puts together.

The only disadvantage that AT&T had prior to last week was that it didn’t own any TV content. Now, the company may soon have $85 billion of content in one swoop. If AT&T can land Time Warner’s HBO, CNN, TBS, TNT, Cartoon Network and other networks, it will certainly have a content advantage over its rivals. In addition, AT&T has said that it will exempt DirecTV Now from customers’ data caps.

If the merger goes through, it seems likely that AT&T could immediately become the top over-the-top “skinny bundle” option for cable TV cord-cutters. So much for Twitter’s window of opportunity.

The Good News for TWTR Stock

Despite the possibility that the live streaming market may be gaining a new dominant player, it’s not all bad news for Twitter stock. First of all, the market is far from convinced that the AT&T buyout of TWX will be approved by regulators. Despite a $110 per share buyout price, TWX stock has been trading under $90 since the deal was announced. If the deal is blocked, Twitter’s live streaming window of opportunity could once again be wide open.

In addition, every big media merger puts more pressure on other media companies considering acquisitions. Once Microsoft Corporation (NASDAQ:MSFT) acquired LinkedIn Corp (NYSE:LNKD), the TWTR buyout rumors started swirling almost immediately. Within days of the AT&T deal with TWX, new rumors about a potential Twitter stockbuyout bid from Walt Disney Co (NYSE:DIS) began to surface.

It’s hard to say how serious the DIS rumors are, especially when the company was reportedly not interested less than a month ago. However, there’s no question that the media merger and acquisition environment is red hot at the moment.

If TWTR stock could join forces with DIS, it could get access to the content it needs to go head-to-head with AT&T on over-the-top streaming.

As of this writing, Wayne Duggan did not hold a position in any of the aforementioned securities.

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Wayne Duggan has been a U.S. News & World Report Investing contributor since 2016 and is a staff writer at Benzinga, where he has written more than 7,000 articles. Mr. Duggan is the author of the book “Beating Wall Street With Common Sense,” which focuses on investing psychology and practical strategies to outperform the stock market.


Article printed from InvestorPlace Media, https://investorplace.com/2016/10/twitter-inc-twtr-stock-surprise-loser/.

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