Twitter M&A Potential Puts A Floor On The Price; Stock Gets Upgrade

Twitter Inc (NYSE: TWTR) is scheduled to report its Q3 results on October 27. Even if the company announces disappointing results or guidance, M&A speculation would provide a floor to the share price and limit downside, Loop Capital Markets’ Blake Harper said in a report.

He upgraded the rating on Twitter from Sell to Hold, while maintaining a price target of $16. The company has had no major product upgrades to drive Monthly Active Users (MAU) higher in the near term, and its live strategy is unlikely to yield great results.

“We continue to believe the swift manner in which TWTR began shopping itself likely reflects the potential for more disappointing results,” Harper commented.

Related Link: False Hope: The Street Believed Twitter & Salesforce Rumors For Too Long

Floor To Share Price

Since the downgrade on September 28, Twitter’s shares have lost 30 percent, Harper noted. He added that the upgrade now reflected the expectation that “the company will eventually push to get a sale done and investors will keep a floor in the value of the company given the expectation of a bid.”

The three companies that were considered as the most probably bidders, namely most closely considered bids - Alphabet Inc (NASDAQ: GOOGL), salesforce.com, inc. (NYSE: CRM) and Walt Disney Co (NYSE: DIS) - have reportedly walked away, which has substantially shrunk the M&A premium, the analyst noted.

“Barring a major deterioration in its user base, which we don't think is likely right now, Twitter should be able to entice others to take a look after it reports, but we believe potential acquirers will be constrained by the same issues as others were before,” Harper wrote.