Twitter (TWTR) stock was soaring in midday trading Friday after CNBC and the Financial Times reported the company could soon receive takeover bids.
CNBC said Google owner Alphabet (GOOGL) and Salesforce.com (CRM) are among companies interested in buying the microblog, which has struggled to recharge user growth.
Twitter stock was up 19%, above 22 and at an eight-month high, in early afternoon trading in the stock market today. The stock, though, has traded in a narrow range for more than a year as the company strives for a turnaround behind co-found Jack Dorsey, who returned as CEO in June 2015 but has so far had little luck.
Google or Salesforce buying Twitter “would have strategic merit” for either company, Scott Rostan, CEO of Training The Street, a corporate training provider for Wall Street firms, told IBD. “It would give them more heft to keep up with Facebook and Microsoft/LinkedIn.”
Microsoft’s (MSFT) is in the process of acquiring LinkedIn (LNKD), a social network for business professionals, for more than $26 billion, a deal announced in June.
Salesforce had attempted to buy LinkedIn, and it “could go to a second choice or shift tactics” by acquiring Twitter, says Rostan, a former analyst at Merrill Lynch. “The big picture is that there is an arms race” going on, and Twitter could boost a buyer’s arsenal.
In a research note Friday, City analyst Walter Pritchard said a Salesforce bid for Twitter is unlikely, and he said Salesforce wouldn’t seem to be hurt if Twitter was acquired by another company.
How Much Speculation Already In Stock Price?
“But my question is that, since Twitter speculation dates back two years or so, how much of that is already baked into the stock?” Rostan said. “It’s impossible to answer, but Twitter already trades at a high valuation and you have to figure it would sell for a 25%, 30%, 40% premium to its pre-speculation price.”
Twitter’s market cap is near $15.5 billion, so it really is pretty much out of the range of any private-equity firms or any leveraged buyout, Rostan says.
“At a certain price, an Alphabet acquisition could make sense as Twitter would help the core Google platform become more competitive with Facebook …,” Stifel analyst Scott Devitt said in a research note Friday. But Devitt maintained a sell rating on Twitter stock and a price target of 9, saying “we do not have a strong view on Twitter being acquired before the end of the year.”
Twitter’s board reportedly met this month with options on the table apparently including putting the company up for sale, but directors instead reportedly opted to give Dorsey a little more time.
Just since then, Twitter has seen success with its live streaming of NFL Thursday Night Football games and last week launched an app for Apple (AAPL)TV, Amazon (AMZN) Fire TV and Microsoft’s (MSFT) Xbox One that lets anyone with these devices get Twitter’s live streaming video and other Twitter content.
The microblog is desperately striving to recharge growth as its loses mind share to Facebook (FB), Instagram, Snapchat and other social media outlets.
Alphabet’s Google, meanwhile, has failed to gain steam with its Google+ social network, and Salesforce.com has a social network for enterprises, called Chatter. Salesforce lost out to Microsoft in June for professional networking firm LinkedIn (LNKD).
Twitter has a couple of pacts with Google, dating to early 2015. That’s when Twitter Tweets began appearing in Google search results. And Twitter’s Promoted Tweets ads are sold in part via Google’s online ad operation.
Vala Afshar, Salesforce’s chief evangelist, Friday morning sent out a tweet extolling Twitter.
1 personal learning network
2 the best realtime, context rich news
3 democratize intelligence
4 great place to promote others
9:28 AM – 23 Sep 2016
518 518 Retweets 640 640 likes
After many people took Afshar’s comment to be a signal that Salesforce was interested in Twitter, he followed up with another tweet that “I simply love Twitter.”
I have tweeted my personal views regarding ‘Why Twitter?’ numerous times over the past couple of years. I simply love Twitter.
10:25 AM – 23 Sep 2016
82 82 Retweets 179 179 likes
Salesforce stock fell 5.1% by midday to 70.76, dropping to its lowest level since late March. Alphabet fell fractionally to 814.96, just above a 813.98 buy point that it cleared on Thursday.
Late Thursday, RBC Capital analyst Mark Mahaney cut Twitter to underperform from sector perform, and lowered his price target to 14 from 17, saying advertisers are losing interest despite the social network’s many hard-core fans.