Twitter Inc (NYSE:TWTR) shares jumped nearly 25% following the rumors that Salesforce.com and Google have expressed interest in a possible buyout of the struggling social media firm, making the risk-reward profile less attractive according to Standpoint’s top analyst Ronnie Moas.
As such, Moas downgraded TWTR from Buy to Reduce, without providing a price target.
Moas commented, “I have spent time this weekend researching the speculation over a possible Twitter takeover and it is hard to say whether it is a 75/25, 60/40, 40/60 or 25/75 chance and what the multiple and price will be if there is a deal. It all boils down to the fact that I am not comfortable taking a risk and losing the 50% gain we got in this name in the last few months.”
“In my opinion there was an over-reaction in January when the market collapsed and Twitter went down to $17. Here at $22.18, in my opinion, it is fairly valued. If there is a takeover it will go to the high $20s … if there is no deal it could drop down and retest where it was in the second quarter (mid teens) so there is nothing really to get excited about here with a 30% upside at the 30% downside. I prefer to take this money put it into another name that has 30% upside without the downside risk,” the analyst continued.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, 5-star analyst Ronnie Moas has a yearly average return of 5.4% and a 70% success rate. Moas has a 30.1% average return when recommending TWTR, and is ranked #65 out of 4183 analysts. Out of the 42 analysts polled by TipRanks, 7 rate Twitter stock a Buy, 27 rate the stock a Hold and 8 recommend a Sell. With a downside potential of 24%, the stock’s consensus target price stands at $17.78.