Twitter (TWTR: $18.30, up 7% yesterday and another 3% today) Twitter had a good day yesterday. Rumors are currently swirling that the company is on the verge of being bought out by two private investors, former Microsoft CEO Steve Ballmer, and Saudi Arabian investor Prince Al-Waleed bin Talal. Both names are well known in the investing world, particularly where tech companies are concerned. Bin Talal owns 5% of the company and Ballmer owns 4%. Some analysts have stated that they are skeptical that the company will be sold at this time.
There has been considerable speculation in the past 24 hours. CNBC reports that many are attributing the rise in the stock to the potential takeover that may be impending. It certainly could be true as nothing else has happened recently that could have prompted a spike in the stock. In an article published after the market closed on Wednesday, USA Today stated that it was “time for Twitter to sell.” According to him, Twitter has become contaminated with many of the same problems as Yahoo, such as a lack of speed in revenue growth and fierce competition from other social media companies like Facebook, who outperformed them considerably in previous quarters. He also implies that Twitter is unable to specify what its strategy for dealing with such problems is.
Before yesterday’s rise, the stock had fallen 64% over the last two years. Its Monthly Active Users numbers aren’t helping either. They’ve only risen 3% in the past year, leading analysts to conclude that Twitter is stuck in the low 300 millions and has reached its popularity peak. This is one of the reasons for Twitter’s consistent stock declines in recent years.
BMR Take:
Overall, it seems likely that changes are afoot for the company. Some analysts have claimed that it is just as likely that the deal could happen. If it doesn’t, the company may see a change in command, as it has also been highly speculated that CEO Jack Dorsey’s days there are numbered. It appears that there are other buyers interested in Twitter. If that’s true, there will likely be another spike, this time towards our Target of $28.
Note also that we are raising our Sell Price from $11 to $15.