Analyst: Twitter M&A Is 'Inevitable' if Current Trends Continue
Don't expect Twitter Inc. to remain its own company for long. If the current path doesn't change, a sale is basically unavoidable, according to Suntrust Robinson Humphrey Inc. analyst Robert Peck.
"We note that if the current trend of meager user and engagement growth remains, we think it's inevitable that Twitter will need to pursue M&A alternatives as has been discussed in the media for some time," he writes. "Our current read of trends suggest a difficult April and May consistent with April levels thus far."
Peck has kept his "buy" rating on the shares given the perceived value of Twitter as an M&A target. "Twitter within a larger property could be much more efficient on the cost and development lines and benefit from the reach on the top lines," he adds.
The analyst believes a sale would likely be a 2017 event, assuming current trends do not improve. He adds that the most likely partners for such a deal would be Google, Facebook, Apple, or a more traditional media property.
Peck's updated research was sent out due to continued high profile departures at the social media site. He finds these particularly concerning, given the continued advancements of Twitter's competitors Facebook Inc., Snapchat Inc. and Instagram Inc.
Shares of Twitter have been under pressure for some time, falling nearly 60 percent over the past year. The average price target on Wall Street is currently $18, with shares closing at just over $15 on Monday.
The average target was $47.83 one year ago, with the lowest estimate sitting at $38 from Cowen and Company's John Blackledge. Peck had a $44 target at that time.