Now that Elon Musk appears to have walked away from his bid to buy Twitter, how much is the short-messaging service worth now? Analysts think this S&P 500 stock is a bargain.
Putting a price tag on Twitter is tough. The S&P 500 member has enormous reach, with tens of millions of people including heads of state and Musk himself using it. The company also has plenty of cash to get it through the bear market: $2.3 billion as of the first quarter. But it also lost $221 million, on an unadjusted basis, in 2021.
And yet, analysts polled by S&P Global Market Intelligence think Twitter should be worth 46.33 a share in 12 months. If they're right, that would be nearly 36% higher than its closing price on Tuesday.
Morningstar analyst Ali Mogharabi summarizes the optimism many analysts seem to have for Twitter. "We remain confident that the firm will continue to grow revenue (albeit at a lower rate than we had assumed before Musk's offer) and expand margins."
What's Mogharabi's price target on Twitter? It's 47 a share, or just in-line with the typical analyst.
Drama In S&P 500: Sizing Up Twitter's Value
No matter how you look at it, Musk's offer for the S&P 500 stock was too high. Musk valued Twitter at 52.20 a share — or nearly 50% more than its price now. So, it's no surprise Twitter is looking at a court order to force Musk to buy it for that price.
It's clearly not worth that much. But Twitter investors can look to some valuation benchmarks to help put a price tag on the company. One of them is analysts' price targets. What are they thinking?
Specifically, Mogharabi says "We have reduced our revenue growth assumption for Twitter to a 16% five-year compound average growth rate from nearly 20%." Analysts think Twitter will make an adjusted $1.67 a share in 2022, up more than 700% from 2021.
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Looking At Other S&P 500 Multiples
Analysts, of course, aren't the only ones putting a price tag on Twitter. Some might think the S&P 500 stock might return to the price it's averaged over the past 200 days. And if that's the case, it would put Twitter's stock at 44.11 a share, or 29.5% higher than it is now.
What about more fundamental measures? Assuming Twitter stock carries the same price valuation as the S&P 500 on its expected $1.67 a share adjusted profit in 2022, that implies a stock price of 29.10, or nearly 15% lower than it is now. And if it trades like other communications services sector stocks, it would be trading for nearly 21% less than today's price.
Optimists might think Twitter stock could return to its 52-week high. And if so, that's 115% higher than it is now. But at the same time, pessimists thinking it belongs back at the lows would assume it could fall another nearly 9%.
And that's why not all analysts are so bullish. The lowest 12-month price target on the stock is 30 a share, or nearly 12% lower. That's the target of Wedbush analyst Dan Ives, who thinks Twitter is in a "code red situation" and hardly undervalued.
"Twitter and its Board ... will battle Musk in an elongated court battle to recoup the deal and/or the breakup fee of $1 billion at a minimum," he said. "We see no other bidders emerging at this time while legal proceedings play out in the courts. Started with a soap opera in April and ends with a nightmare on a Friday night in July."
What Is Twitter Worth?
Based on a variety of valuation metrics, including S&P 500
| Measure | Price | % ch. from now |
|---|---|---|
| Current stock price | 34.06 | |
| Average 12-month target | 46.33 | 36.0% |
| Low estimate | 30 | -11.9 |
| 200-day moving average | 44.11 | 29.5 |
| Market multiple on 2022 | 29.10 | -14.6 |
| Communication sector | 27 | -20.7 |
| 52-week high estimate | 73.34 | 115.3 |
| 52-week low estimate | 31.30 | -8.1 |
| Musk's bid for Twitter | 54.20 | 59.1 |
