To say Twitter Inc (NYSE:TWTR) shareholders have been jostled a bit this year would be a significant understatement. The TWTR stock price started 2016 at $23, fell to a low of $14 by the middle of the year, soared to $25 by early October on rumors that an acquisition was coming, and since then have peeled back to $18 when none of the suggested suitors actually pulled the trigger.
As the old saying goes, “Fool me once, shame on you. Fool me twice, shame on me.” Most owners of Twitter stock, having been burned, aren’t apt to get their hopes up again that a buyout is looming.
The irony? Now that most investors aren’t expecting it, they should probably be expecting it.
TWTR Stock: Timing Is Everything
Were the business of buyouts not like junior-high romances, it might be easier to digest the notion that Twitter is still a prime acquisition target. In other words, whispers, rumors, other potential hookups and worries about what everyone else will say can often upset would-be eighth-grade relationships. Ditto for buyouts.
And like middle-school love, suitors are kind of funny about getting back together with an “ex” when things go sour as quickly as they did between TWTR and Walt Disney Co (NYSE:DIS), Twitter and Salesforce.com, Inc. (NYSE:CRM) and even Twitter and Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL). TWTR stock wasn’t ready to be acquired then, and with conclusions drawn, it could be a while before the company is seen as buyable.
The frustrating part: Twitter is still a very ownable company, particularly in the hands of an organization that has dealt with consumers before. In early October though, that simply wasn’t the case.
Plus, there was the not-so-small matter of a sky-high Twitter stock price that made any deal too rich for most potential buyers by the time any of them could have made an offer.
What a Difference Two Months Makes
To be clear, TWTR hasn’t successfully completed a turnaround since early October. A turnaround, however, has become much more plausible during that time.
For one thing, the power of using Twitter as a means of merging video and social networking has been validated in the meantime. TWTR had served as the venue for only a second NFL game by the point when the buyout rumors first surfaced, but there’s no denying it was still little more than an experiment at the time. If Walt Disney was looking for decisive evidence that it could revive its struggling ESPN division by melding it with the Twitter platform, it certainly didn’t have it at the time.
Now, however, that partnership with the NFL is turning heads. The remainder of the ten games Twitter had contracted are airing, and the league is pleased. In the meantime, Twitter has secured an actual sponsor for two NBA-related livestream programs that will air in the Philippines.
It’s not just the advent of sports and related television programming that reposition TWTR stock in a fruitful way, however (although its sports partnerships go miles to answering the question “why should I go to the Twitter page?”) The company is cleaning up its platform, in multiple ways.
Had it only been cited by Salesforce.com CEO Marc Benioff as one of the key reasons he couldn’t justify doing a deal, it may have been dismissed. But, it wasn’t just Benioff. Most observers agree that Twitter has a bullying problem.
It may not matter much right away, but in the middle of November, the company finally started to get serious about dealing with the hateful rhetoric that makes the microblogging platform a liability.
Point being, much-needed changes are underway.
Bottom Line for Twitter Stock
It’s never a good idea to own a stock simply because the company is a rumored acquisition target. TWTR stock is no exception. But, when a much-needed turnaround is underway for that company, decent odds of a buyout certainly don’t hurt the bullish argument.
And yes, there’s finally a light at the end of the tunnel for Twitter stock, on its own, or with a partner/buyer.
TWTR still has a lot of problems to solve, to be clear. To that end, the fact that not one single company nibbled two months ago was a wakeup call for Jack Dorsey — changes have to be made. In the meantime, they’ve started to be made.
The catch: Anyone who thinks they can wait to profitably step into Twitter stock on hopes of a buyout right before that news becomes public knowledge is fooling themselves. To avoid the very price run up that turned a bunch of buyers off two months ago, any deal is likely going to be done before any non-insider has any clue an agreement has been made.
If you want to make a worthy trade on any buyout potential, you have to own TWTR stock now, when there’s no real certainty it’s going to happen.
But, you could do a lot worse.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.