Wall Street's Take on Elon Musk's Twitter Purchase

Twitter Inc. (NYSE: TWTR) has been a lightning rod for attention since billionaire, turned activist investor, Elon Musk announced his intentions for the company in early April. Whether investors are on one side of the aisle or the other, the terms of divining the future of the company are up to him. At the same time, there is no doubt that this deal has helped propel the stock off multiyear lows.

Since Tesla’s CEO announced early this month a $44 billion offer to take Twitter private, the stock has gained more than 26%. From a 52-week low posted a month earlier, the shares are up 53%. Now that it appears that Musk’s deal will close later this year, the primary reason to follow the stock is for a window into the business of a venerable social media company and how it is stacking up against rivals like TikTok.

Looking ahead to the quarterly results Thursday, revenue is expected to come in at $1.23 billion, down 21.8% sequentially and up 18.3% year over year. Adjusted EPS are forecast at $0.02, down 92.9% sequentially and 87.5% year over year.

Of 36 brokerages rating the stock, there are 30 Hold ratings and three Buy ratings. At the most recent closing price of $49.68, the stock trades above a consensus price target of $46.63. Musk’s offer of $54.20 per share still implies a sizable premium for the stock. The 52-week range is $31.30 to $73.34.

Some analysts ask if the deed done, but 24/7 Wall St. is looking at a handful of these calls surrounding Twitter and what they mean going forward.

Cowen reiterated a Market Perform rating and was pretty bare bones in its analysis. The analyst noted that the all-cash deal that values Twitter at $44 billion will be funded by a mixture of $21 billion in equity and $25.5 billion in combined debt and margin loans. The deal is contingent upon a shareholder vote and regulatory approval, and it is expected to close in 2022.

Mizuho analyst James Lee raised the firm’s price target to $54 from $46 and reiterated a Neutral rating. Lee expects the takeover transaction to go through, given the significant premium of Musk’s offer. He does not expect other natural buyers, such as media companies or private equity firms, to counter the offer due to uncertain economic conditions.

Oppenheimer’s analyst, Jason Helfstein, moved to a rarely seen Not Rated rating from Perform after the announcement that the deal was accepted. Helfstein does not expect other bids, as large tech companies would likely face significant regulatory headwinds, and the limited cash flow is prohibitive for a leveraged private equity bid.

Stifel’s analyst Mark Kelley upgraded Twitter to Hold from Sell and raised the $39 price target to $54.20. Kelley noted that he did not anticipate the speed at which Musk was able to secure financing and rally existing shareholders. He does not anticipate other bidders “to come out of the woodwork here and [he views] this deal as the most likely outcome.”

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