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Twitter Stock: Is a Buyout Their Only Hope?

Posted On September 12, 2017 2:40 pm
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Growth is almost nonexistent at Twitter Inc, and an acquisition seems to be the only hope left for frustrated investors. Fortunately for owners of Twitter stock, that buyout may yet happen. Investment firm BTIG has long been bullish about the possibility of Twitter being acquired by a tech giant. In June, BTIG analyst Rich Greenfield said that Twitter will eventually be bought by Disney. At that time Greenfield was bullish about the increasing engagement on Twitter.

The analyst was hopeful that the company would be able to translate the engagement to revenues. He had even said that he’d be “shocked” if Twitter was still a public company in the next two years.

Greenfield was also optimistic about Twitter stock on the back of the “Trump” factor, suggesting that heated debates on Twitter ensuing Donald Trump’s incessant tweets could make the social platform hot again. But unfortunately this bullish case hasn’t realized yet. Twitter’s monthly active user count failed to go North of 328 million in the second quarter, while analysts had expected the company to add at least one million new users in the period. Revenue in the period was down about five percent year over year to $574 million.

Rich Greenfield hasn’t lost hope on the possibility of Disney acquiring Twitter. But the investor has changed his thesis. In a recent interview with CNBC, the analyst said that it’s in the best interest of Walt Disney to acquire Twitter. However, Greenfield said this in the context of the company’s plummeting profits and sports revenue.

Disney’s operating income for its cable segment fell over 23% in the most recent quarter, as programming costs continue to rise and ads revenue is failing to recover. Disney CEO Bob Iger recently said in a conference that the company’s EPS will be same as that of last year. However, Iger expects 2018 to be a “stronger” year.

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Greenfield thinks that Disney “needs to own Twitter”. He believes that sports programming in the US is increasingly moving to Twitter. Twitter has signed several deals with media outlets and sports entities, including NBA, to stream live and exclusive sports content on its platform. Twitter also has a deal with WNBA to stream women’s pro hoops league season games over the next three years. But Twitter has already started facing tough competition in sports programming.

The company lost its deal with NFL after Amazon offered NFL $50 million for 10 games, compared to $10 million paid by Twitter.

The social media company’s fundamentals remain weak, and we believe that Twitter stock isn’t worth the investment based on the buyout speculation.

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