Twitter shares have plunged -16% since reporting earnings last week. Investors sold shares hand over fist after President Trump’s favorite messaging platform reported underwhelming revenue numbers and user growth which missed Wall Street expectations. Following the disappointing results, chattered emerged yet again about the possibility of the $10.5 billion social media company being acquired.
During a call with institutional subscribers ahead of Twitter’s earnings report last week, Hedgeye Internet & Media analyst Hesham Shaaban suggested that Twitter is not a takeout target given its deteriorating fundamentals, and the likely backlash any would-be acquirer would receive from the Street.
“At $10 billion, I don’t really think there are a lot of CEOs that would stick their neck out for a company that is producing declining revenues,” he says.
Investors should consider what happened to Salesforce (CRM) shares last October. Rumors erupted that the company’s brash billionaire CEO Marc Benioff was considering buying Twitter. Shares of Salesforce promptly fell -10%.
With the possibility of an acquisition off the table, investors are stuck with a business that is putting up declining revenues. “If you are a social media company and revenues declining, you start to get compared to other internet companies that have fallen by the wayside,” Shaaban says.
