Analyst Actions: Twitter's Price Target Boosted by Pivotal as Speculation Ramps Up for More Possible Suitors
6:41 AM ET, 09/27/2016 - MT Newswires
06:41 AM EDT, 09/27/2016 (MT Newswires) -- Twitter (TWTR) received an increase to its price target Monday afternoon from Pivotal Research Group as more possible suitors including Disney (DIS) and Microsoft (MSFT) entered the rumor mill.
Pivotal's price target on TWTR is now $27 per share, up from $22, while the firm reiterated its investment rating on Twitter's stock at buy. The shares climbed 3.3% in Monday's session to $23.37 and have soared 25% since Thursday's close. The deal speculation started Friday amid reports that Salesforce.com (CRM) and Alphabet (GOOGL, GOOG) might be considering bids for Twitter.
"As the prospect of an acquisition of Twitter seems increasingly likely we are reducing the cost of capital embedded in our model to a point that is closer to many of its potential acquirers vs. what was previously embedded in our model," Pivotal said, hence the new price target.
"In general, we recognize that investors in Twitter will look at an acquisition favorably, while investors in any entity which might bid for Twitter will look at such a transaction negatively," Pivotal noted to its clients Monday afternoon. "We remain generally positive oriented around Twitter, given its position as the fourth-most-important seller of digital advertising globally outside of China, and argue that the global influence of the platform is difficult to match."
The firm said for Alphabet, "there is value to Google in gaining another type of media property to complement its paid search, YouTube, display and ad tech businesses. We would argue that an acquisition of Twitter would be far better a use of capital than sitting on cash or on investing more in an unrelated business such as, let's say, Google Fiber or self-driving cars." It added: "There is also the value of securing access to data associated with tweets, as this data can benefit Google's search product."
For Salesforce.com, "the logic behind their interest may be harder to appreciate, and the relative size of the companies is closer, making an acquisition very impactful," Pivotal said, adding it "can see benefits to Salesforce.com from tightly incorporating Twitter data into the company's core [customer-relationship-management] software."
For Disney, the firm said "the pros and cons of an acquisition depend upon the vision for how Twitter would fit. For example, we can see a clear advantage to ABC's News division and to ESPN as a platform to deliver real-time news and sports-related content...However, the risk to Twitter is that ownership by one news-gathering organization might cause competitors (i.e. Fox News, CNN, NBC, CBS) to refrain from using the platform or favor a competitor such as Facebook, potentially leading to fewer users of the platform."
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