Seeking Alpha
Long/short equity, contrarian, research analyst, portfolio strategy
Profile| Send Message|
( followers)  

Summary

  • TWTR is no longer vulnerable to lock-up expiration selling.
  • I like TWTR's decision to hire Anthony Noto and think it bodes well for the stock.
  • TWTR is a potential acquisition target.

Shares of social media giant Twitter (NYSE:TWTR) have been under heavy selling pressure so far in 2014. A number of factors have driven TWTR shares lower including a changing market sentiment towards high valuation stocks, earnings that have fallen short of expectations, and the increase in float due to expiration of TWTR's lock-up.

TWTR ChartTWTR data by YCharts

Lock-Up Expiration

The lock-up expiration was one of the reasons why I had been bearish on TWTR in January. TWTR was not the only social media stock to be heavily impacted by selling due to the lock-up expiration. It should also be noted that the expiration of the major lock-up was when Facebook (NASDAQ:FB), the largest social media stock, hit bottom. It would not be surprising to see that TWTR's lock-up expiration also ends up being a major bottom for the stock.

FB ChartFB data by YCharts

Anthony Noto

TWTR recently named former Goldman Sachs technology banker Anthony Noto as its new CFO. I believe that Noto's expertise will be helpful for TWTR as the company works to figure out how to monetize its user base. I also believe that bringing in someone from outside the company is beneficial as it will help the company see things from a different perspective. Finally, as part of his pay package, Noto received 1.5 million restricted common stock units along with the option to buy an additional 500,000 shares. This package clearly aligns Noto's pay with TWTR's stock performance.

Twitter Is A Potential Takeover Target

Simply put, the current M&A market is red hot with deals coming at a furious pace. Perhaps the most notable tech deal of late was Priceline's move to buy OpenTable (NASDAQ:OPEN) for $103 per share, a massive premium. While TWTR would certainly be a very large deal, there are a number of larger technology companies that could be interested. Apple has been discussed as a possible buyer of TWTR on multiple occasions. Certainly Apple (NASDAQ:AAPL) has the cash to buy TWTR and a lot of talented people who could help monetize the social media platform. In addition to Apple, Google (GOOG, GOOGL) & Microsoft (NASDAQ:MSFT) could be potential buyers of TWTR. I could even envision Facebook making a move to buy TWTR. In a previous piece, I discussed why I like Priceline's move to buy OpenTable. Basically, I believe Priceline (NASDAQ:PCLN) will be able to enhance OpenTable's offerings to substantially increase the income generated by OpenTable. I think a similar case could be made if Apple or Google acquire TWTR. Both companies would likely be able to find a unique way to leverage their platforms along side TWTR to create something special.

Conclusion

It is difficult to make a case for TWTR based on valuation and thus any opinion of TWTR in highly speculative in nature. That being said, I believe the time is right to buy TWTR. The combination of the lock-up expiration being in the rear view mirror, Anthony Noto being hired as CFO, and the possibility of a takeover are the reasons why I am bullish on TWTR.

Source: Twitter: 3 Reasons Why I Am Bullish