TWTR Stock: Twitter Talks Merger with Yahoo

Twitter

TWTR stock is rallying by more than 2 percent in recent pre-market trade amid a NYPost report that the social-networking site met with Yahoo (YHOO) to discuss merger. The report, citing unnamed sources close to the talks, claims execs at the two firms had met several weeks ago and had spent hours “hashing out Yahoo’s financials” and looking at whether a strategic combination might make sense.

“Twitter is the destination for instant news, and Yahoo has a lot of eyeballs on its site,” one source told the publication, adding “[t]he idea isn’t as crazy as you might think.”

The Post also reported that Twitter’s Jack Dorsey wasn’t present during the talks and the sources said Twitter appeared “mainly interested in sucking information out of Yahoo, as it bowed out of the bidding process soon thereafter.”

One reason against Twitter, Inc. (TWTR) not pursuing merger talks is that if Yahoo’s core business is worth $6 billion to $8 billion, Twitter might not have the cash. As it is, the shares, with a market cap of $10.6 billion, fetch 22x forward revenue projections for next year, albeit on a 31% growth rate. However, Twitter is still not profitable, recording a net loss of $80 million for the first three months of 2016. In terms of t-12 profit and operating margin, the company currently records both of those numbers at (18.44%) and (15.25%), respectively.

Bottom Line

In the past 52 weeks, shares of struggling San Francisco, California-based microblogging site have traded between a low of $13.73 and a high of $38.82. Shares are down 58.92% year-over-year, and 34.31% year-to-date. The median Street price target on the name is $18.00 with a high target of $32.00. TWTR boasts 12 ‘Buy’ endorsements, compared to 23 ‘Holds’ and 3 ‘Sell’.

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