Twitter Inc (TWTR) shares moved higher Tuesday thanks to a price target increase from one analyst with a contrarian call.
Twitter Price Target: $27 Per Share
Most analysts appear highly skeptical that the rumors of Twitter being acquired by any company are any truer now than they have been in the past, but Brian Wieser of Pivotal Research seems convinced that this time will be different. As a result, he increased his price target for the micro-blogging company from $22 to $27 per share and reiterated his Buy rating.
His move stands in stark contrast to Oppenheimer Holdings Inc. (USA) (OPY) downgrade, which came after Twitter shares skyrocketed by more than 20% in response to Friday’s renewal of the buyout rumors. Interestingly, Weiser referred to Twitter as “the fourth most important seller of digital advertising globally outside of China.” Oppenheimer called the company “the sixth best social media platform.”
Wieser notes that generally Twitter investors would see an acquisition as being a positive, but investors who hold shares in a company that bids for the micro-blogging platform would see a deal as a negative.
However, he is bullish on Twitter as he feels that its global influence is “difficult to match.” He admits that the company is currently facing some challenges, but he sees it as “durable” and believes that its business is able to be improved.
The analyst notes that any acquisition “will require either real synergies or a leap of faith in the management of the acquiring entity to justify a favorable assessment of any acquiror’s decision.”
Google parent Alphabet Inc (GOOGL) has long been floated as a potential suitor for Twitter, and not only because of its own essentially failed attempt at social media, Google+. Twitter Inc (NYSE:TWTR) could also help with its paid search, YouTube, and display business.
Wieser believes acquiring the company would be a better use of Alphabet’s cash than just sitting on it or pouring it into “unrelated businesses” like Google Fiber or self-driving cars.
Don’t Do It, Salesforce: Stifel
Last week it was reported that Salesforce.com, Inc. (CRM) was supposedly considering making a bid. Weiser noted that for this company, the logic of it is more difficult to get it, and because the two companies are similar in size, it would be more difficult to implement. He sees a potential fit by integrating Twitter’s platform with its core customer relationship management products. Because of the challenges here though, he notes that investors would be right to question whether Salesforce needs to own Twitter rather than just strike a partnership with it.
Stifle Financial Corp (SF) analyst Tom Roderick did exactly this on Friday, advising Salesforce, “You don’t need to buy the cow.” Although he doesn’t think a combination with the micro-blogging platform is a good idea, he says it could make sense “functionally.” He sees value in the platform’s business-to-consumer segments and believes Salesforce’s Marketing Cloud and Service Cloud could utilize these parts of the platform. However, he believes any benefits that could be enjoyed can be secured through a partnership or contract rather than a merger.
As for the newest addition of alleged suitors, Walt Disney, Wieser sees advantages to the ABC News segment and ESPN in terms of a real-time news and sports content platform.
He does note that the problems here is that competitors such as NBC might stop using Twitter if it were owned by a media company.
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