TWTR Stock: The Only Reason Why No Bidder Will Step in to Arrest Twitter’s Fall

Twitter's stock direction is tightly linked to takeover rumors.


Twitter Inc (NYSE:TWTR) stock posted losses in early trade Thursday, dipping again below the $18 level as the Street assesses conflicting rumors that all is not lost in terms of a takeover. While it had been reported that all bidders had stepped away from considering buying the struggling social media site, a later report explained that online software firm inc (NYSE:CRM) is still in despite opposition from some of its shareholders over a potential acquisition.

However, in case you are long and hoping to bank on a buyout of Twitter, consider the fact that Global Equities’ Trip Chowdhry a short while ago told CNBC that Twitter shares could hit $10 in 2017,  making it attractive takeover target then despite failing to be bought out this time around.

“In 2017, getting a price of even $10 (for Twitter) will be difficult. In 2016, getting a price in the $20’s is possible. If you are a potential acquirer, the best strategy is to wait and not over pay,” Chowdhry said, adding that he expects to see a valuation correction for new tech flotations in FY2017, a correction he said that could flow through to Twitter.

Twitter stock currently prints a one year loss of about 38%, and a year-to-date loss of around 22%. The name plunged as much as 14% to close 11.5% lower at $17.56 on Monday after news that bidders including Google-parent Alphabet, Inc (NASDAQ:GOOGL), Salesforce and Walt Disney (NYSE:DIS), had walked away.

Currently, TWTR has a market cap of $12.7 billion and a median 12-month base case estimate of $16 a share. If ticker was to print the tape at $10 a share next year, this, besides implying a 45% expected downside from current levels, it would also represent a market cap based on diluted shares outstanding of about $7 billion. If Chowdhry is right in his analysis, then Twitter is a shorter’s dream trade.

Meanwhile, the Street seems to be focusing its attention toward the company’s impending Q3’16 financial report, on October 27th. Several firms, including Evercore ISI and Deutsche Bank (NYSE:DB) predict a TWTR earnings beat. Analysts expect the micro-blogging giant to report earnings per share of $0.09 and revenue of $606.4 million. That would be $0.04 lower the $0.13 per share posted last quarter and $0.01 lower the $0.10 posted in the Q315. Revenue is projected to be $37.4 million higher than the $569 million posted in the same period a year earlier.

Shares of Twitter are down 1.27% at $17.82 as of this writing. The name trades well below its Nov. 2013 IPO price of $26 a share.

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