Twitter (TWTR): The Premium Is In The Price - Suntrust
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SunTrust Robinson Humphrey, analyst, Bob Peck, reiterated his Neutral rating on shares of Twitter, Inc. (NYSE: TWTR) stating that the acquisition premium is in the stock. The WSJ article points to Marc Benioff’s reported comments of Twitter being “an unpolished jewel” and that “Data is the currency in software’s new world order.” The article mentions other potential bidders include Alphabet and Disney.
Key points to consider in a Salesforce.com (NYSE: CRM) bid:
1) the material size a premium for Twitter would represent to Salesforce’s market cap (~30% of the total company). This is a significant move, >7x Salesforce’s largest acquisition to date, and one that would warrant significant investor support. The price tag would be significantly less dilutive for Alphabet or Disney.
2) the accuracy of data. In the article, the emphasis on the value of data is important but while LinkedIn and Facebook have valuable verified data about users, Twitter’s profile data is largely unverified, and less complete
3) the company reports >320m MAUs, there are several questions as to the value for an acquirer: a) the amount of fake / bot “users”; b) the materiality of size in the US; c) the trends in engagement levels of users; d) what to do about Not Safe For Work content; e) if the user data could be harnessed through a business development deal
4) what is fair premium? a $26 take out, the IPO price, would represent >6x fwd sales and >22x fwd EBITDA (ignoring excess SBC)
No change to the price target of $18.Twitter (NYSE: TWTR)
Shares of Twitter, Inc. closed at $23.52 yesterday.
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Create E-mail Alert Related CategoriesAnalyst Comments, Mergers and Acquisitions
Related EntitiesSunTrust Robinson Humphrey, Twitter, Definitive Agreement, IPO
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