Elon Musk’s $44 billion offer to buy TWTR now stands at a critical crossroads, with the Tesla CEO threatening to walk away from its purchase, accusing the social media company of violating the merger agreement. The stock declined amid investor apprehensions about the deal. So, would it make sense to invest in TWTR now? read on.
Tesla, Inc. ,TSLA) CEO Elon Musk has been in the news recently threat of cancellation His $44 billion Twitter, Inc. ,TWTR) buyout offer accusing the social media company of violating the merger agreement. Musk alleged that the social media company is “actively opposing and thwarting their information rights.”
Shares of TWTR fell more than 6% as Musk’s threat left the deal’s prospects uncertain and are currently trading much lower than the $54.20 per share takeover offer, fueling investor fears around the deal. It reflects.
Although TWTR well outpaced consensus earnings estimates, it failed to exceed revenue estimates last quarter. Furthermore, analysts expect its EPS to fall 21.7% year-on-year for FY2023. The stock has lost 13.5% year-over-year and 37.6% in value over the past year to close the previous trading session at $37.36. It is currently trading 49% below its 52-week high of $73.34, which was hit on July 23, 2021.
If the deal is canceled, it could affect the performance of TWTR in the coming months:
TWTR revenue increased 15.9% year-over-year to $1.20 billion for the first quarter ended March 31, 2022. The company’s non-GAAP net income increased 435% year-over-year to $755.57 million. In addition, its non-GAAP EPS came in at $0.90, representing an increase of 462.5% year-over-year. In addition, its Adjusted EBITDA grew 301.2% year-over-year to $1.18 billion.
mixed analyst estimates
Analysts expect TWTR’s EPS to decline 21.7% year-over-year to $1.30 for fiscal 2023. Its revenue is expected to grow 15.9% and 21.5% year-on-year to $5.88 billion and $7.15 billion, respectively, for fiscal years 2022 and 2023.
In terms of forward non-GAAP P/E, TWTR is 32.89x, 99.4% higher than the 16.49x industry average. Likewise, its 4.95x forward EV/S is 152.5% higher than the 1.96x industry average. And the stock’s 5.22x forward P/B is 1.81x 187.7% above the industry average.
low profitability from the industry
TWTR’s trailing-12-month net income margin of 4.27% is 7.9% below the 4.64% industry average. Likewise, its trailing-12-month EBIT margin of 1.77% is 80% below the industry average of 8.89%. In addition, the stock’s trailing-12-month asset turnover ratio of 0.37% is 20.7% lower than the industry average of 0.46%.
Power rating reflects uncertainty
TWTR has an overall rating of C, which is equivalent to neutral in our power rating Arrangement The POWR rating is calculated by taking into account 118 different factors, each factor being weighted to an optimum degree.
Our proprietary rating system also evaluates each stock based on eight different categories. TWTR has a C grade for sentiment, which is in line with its mixed analyst estimates.
The stock is currently trading below its 50-day and 200-day moving averages at $43.43 and $46.12, respectively, indicating a downtrend in sync with its D grade for momentum.
Despite Elon Musk’s decision to buy TWTR, it may not be prudent to buy the stock right now as analysts expect its EPS to decline in FY2023. Furthermore, the stock is currently trading at an extended valuation. In addition, if Musk’s claim that TWTR is misleading investors about the number of fake accounts and bots on its platform is higher than initially estimated, it could affect the stock’s performance. Therefore, it may be wise to wait for a better entry point into the stock.
How Twitter Does It (TWTR) Stack up against your teammates?
While TWTR has an overall POWR rating of C, you may consider investing in the following internet stocks with an A (strong buy) or B (buy) rating: Yelp Inc. ,bark), Trivago NV (TRVG), and Travelzoo (tzu,
Shares of TWTR were trading at $37.23 per share, down $0.13 (-0.35%) on Friday morning. Year-on-year, TWTR declined by -13.86%, while the benchmark S&P 500 index gained -22.68% during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This earned him a master’s degree in finance and accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a keen interest in reading and analyzing emerging trends in the financial markets.
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