Twitter Inc (TWTR) stock is soaring on Monday, with shares up more than 8% in morning trading. Shares of the social media company are up in sympathy with LinkedIn Corp (LNKD), which was bought for a 49.5% premium to Friday’s closing price.
But TWTR stock holders need to get a grip — Twitter isn’t going to be bought out.
TWTR Stock: Not Buyout Material
Microsoft Corporation (MSFT) bought LinkedIn for strategic reasons — it’s hoping to improve its cloud business, Azure, to compete with the likes of Amazon.com, Inc.’s (AMZN) Amazon Web Services.
TWTR, as you probably know, provides no such advantage for any potential acquirer.
Sure, Twitter shares are still down nearly 60% in the past year even after today’s massive rally, making TWTR stock an ostensibly attractive buyout candidate by some estimations.
By my estimation, Twitter is just as screwed as ever, and investors should take this opportunity to sell TWTR stock.
Twitter is a social network whose user base is entirely stagnant, hovering around 332 million active users. Facebook Inc (FB), for its part, is more than five times Twitter’s size at 1.65 billion users, and still manages to grow its user base faster than Twitter.
That’s pitiful.
LNKD has a growing network of professional users, many of whom pay monthly subscriptions fees for the site’s job-seeking services. Employers also pay LinkedIn to use the network to post jobs, recruit talent and communicate with potential employees.
Meanwhile, LinkedIn’s Lynda.com boasts online training programs that help users with their professional development.
Twitter, on the other hand? Its biggest draw right now is Donald Trump’s incoherent rambling. With an ad-based model, millions of bots parading as real people and a CEO spending only half his working hours focused on Twitter, I don’t expect suitors to be lining up around the corner for TWTR stock.
That’s not to mention that on a GAAP basis, Twitter isn’t even profitable yet. Not even close. Last fiscal year, the company lost $521 million. The year before that, $578 million. Two years ago, TWTR was $645 million in the hole.
Sure, that’s a favorable trend — but wouldn’t it be nice to actually break into the black at some point?
This is what stubborn TWTR stock owners miss: The window of opportunity for Twitter to undergo an actual turnaround is closing.
That turnaround was supposed to begin in earnest when Twitter named the company’s co-founder and former CEO Jack Dorsey the head honcho once again in October, but instead of catalyzing a recovery, TWTR stock has fallen 42% under his tenure and an executive exodus has been underway.
Please, for the love of your portfolio: Don’t buy TWTR stock today because the LNKD acquisition reminded you that Twitter could one day be bought out.
Until the day Twitter gets a legitimate cloud presence, diversifies its revenue stream and starts re-energizing user growth, that result remains nothing more than a pipe dream.
As of this writing, John Divine was long shares of AMZN stock. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
