Twitter's (TWTR) TellApart Deal was Costly, SunTrust's Peck Says

SunTrust Robinson Humphrey analyst Robert Peck again cut his price target on Twitter, Inc. (NYSE: TWTR) after the disclosure of the TellApart deal size.

The firm's price target goes to $44.00 (from $45.00) with the Neutral rating maintained as the company's disclosure suggests the TellPart deal cost ~$550 million.

Peck commented, "The deal is valued at ~$533M, making this its largest acquisition to date (MoPub ~$350M and TapCommerce ~$100M). The deal consists of 12.6M shares of Twitter stock price at $42.27, the closing price on 4/28. No further details on management contracts, earn outs, cash component or cash acquired was disclosed. Our capital structure points to ~737M fully diluted shares, which would mean the deal is ~1.8% dilutive in its current form. We reduce our target price by $1 to $44 to account for the dilution. Our price is based on 35x 2016E EV/EBITDA and 9x EV/Rev.

He added, "We are surprised by the lack of disclosure on the earnings call that Twitter had made such a sizable acquisition (~$550M). Further, we question what the acquisition (along with the Double Click deal) means for the current state of Twitter's ad tech stack. Lastly, we think the size and significance further weighs on management and would not be surprised to see shareholder frustration voiced about execution and disclosure."

For an analyst ratings summary and ratings history on Twitter, Inc. click here. For more ratings news on Twitter, Inc. click here.

Shares of Twitter, Inc. closed at $38.49 yesterday.

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