Twitter (NYSE: TWTR) stock has risen over 26% in the past 30 days. The primary reason for this is the announcement that Elon Musk, CEO of Tesla, wants to buy the social media giant after building up his stake in the company. With much speculation flying around in the media, and the Twitter board making a series of announcements, is now the time for me to buy Twitter stock?

The story so far

The story began back in late January when Elon Musk began building his stake in Twitter. By March 14 he had amassed a 5% holding in the company. Fast forward to April 4, news broke that Musk had a 9.1% of the stock. The shares surged over 27%. After this news, Musk was invited to join the Twitter board, which he later declined.

On April 14, the stock jumped another 7% when Musk announced he had made an offer to buy Twitter for $43bn. This equates to $54.20 which represented a 54% premium over the day Musk first invested, and a 38% premium before the investment was announced publicly.

Twitter is yet to respond to Musk’s offer but has since adopted a ‘poison pill’ strategy. This essentially means allowing investors to buy more shares to dilute Musk’s ownership. The strategy Is expected to kick in if the Tesla chief acquires any more than 15% of Twitter stock.

Just last week, Musk announced he had acquired the necessary funding for a takeover. Over $20bn of this would come from a series of loans from investment bank Morgan Stanley, with the rest coming from selling his own equity.

Twitter stock closed just shy of $49 last week, rising 3.9 % on Friday. This shows me that investors are becoming more confident that a realistic deal may be on the table.

Why I’m not keen on Twitter stock

Yet for me, the situation is too up in the air to invest. Although Twitter stock is still rising, Musk’s unpredictable nature worries me. After all, there are already rumours floating around in the media that the whole saga is just a well-designed publicity stunt. If Musk does exit the deal, then I expect Twitter stock to tank.

If Twitter accepts a $54.20 per share offer then I would be making around 10% profit. This is by no means a bad return. In fact, if I was a day trader then I might well have taken a punt. However, I prefer a long-term outlook and I invest in stocks that I think can give me that kind of growth each year consistently.

Therefore, while I find the story very interesting to watch, I will not be adding any Twitter stock to my portfolio today.  

The post Is Twitter stock a buy amid Elon Musk takeover speculation? appeared first on The Twelfth Magpie.

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Dylan Hood has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesla and Twitter. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Elon Musk is now the biggest shareholder in Twitter (NYSE:TWTR) following a $2.9bn investment in the company’s shares. His 9.2% stake eclipses those of institutional investors, such as Vanguard and BlackRock. Musk has also joined the board of directors. With the share price surging on the news, let’s explore where the social media stock could go next and whether it would be a good buy for me.

Reversing a downward trend in the Twitter share price?

Since reaching $77.06 per share in February 2021, Twitter stock has declined dramatically over the past year. The share price has traded below $40 for most of 2022. However, Elon Musk’s recent involvement brought it above $50 again in the stock’s largest intra-day gain since Twitter’s IPO in 2013.

Yet fundamental challenges remain. Twitter has posted a net profit for only two years in the past decade. In 2021, the company paid out $809.5m to settle a shareholder class action lawsuit alleging that executives, including former CEO Jack Dorsey, concealed information regarding its slowing user growth.

Musk’s arrival on the board heralded an initial reversal in the share price, but there are question marks over whether this can be sustained.

A potential shake-up for Twitter’s policies

Despite being an avid Tweeter, Elon Musk has been a notable critic of the microblogging site. For instance, he recently admonished Twitter’s development of profile pictures linked to non-fungible tokens (NFTs).

Moreover, on 25 March, Musk polled his Twitter followers to ask whether the social media network rigorously adhered to the principle that “free speech is essential to a functioning democracy“. Over 70% voted no.

Musk intriguingly stated that “the consequences of this poll will be important.” So, big changes may be on the horizon for the company’s policies, which could have potential implications for the share price.

Indeed, many Republicans are already lobbying Musk for the reinstatement of former US President Donald Trump on the platform. Twitter has banned Trump since the storming of the Capitol in January 2021.

However, Musk doesn’t have a controlling stake and there are 11 other directors on the board. Their support will be critical to enact any future changes. Accordingly, investors may be overly optimistic about the influence the world’s richest man will have on the Twitter share price.

Is now a good time to buy Twitter shares?

For me, while Elon Musk’s involvement is good news for current shareholders in the short term due to increased publicity and speculation about his future plans, I am sceptical that the Twitter share price will benefit longer term.

I suspect Musk’s primary loyalty will remain with Tesla. He’s also the CEO of SpaceX and Neuralink. As a self-professed “free speech absolutist“, the multi-billionaire’s ambitions for Twitter may not be primarily motivated by financial concerns.

I’m also not convinced Musk’s arrival on the board will be enough to rescue Twitter’s struggling business model. The company lost nearly $1.4bn over the past two years, in stark contrast to profitable competitors, such as Meta.

If I owned Twitter stock, I would take profits from the recent rise in the Twitter share price. However, I’m not a shareholder and, for me, this is not an attractive entry point to buy Twitter shares.

The post The Twitter share price soars 30% as Elon Musk joins the board! Should I buy? appeared first on The Twelfth Magpie.

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Charlie Carman does not own shares in any of the companies mentioned. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. The Motley Fool UK has recommended Tesla and Twitter. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

WASHINGTON, DC — Is Google (NASDAQ: GOOG.US) (NASDAQ: GOOGL.US) planning to buy Twitter (NYSE: TWTR.US) soon? Recent rumours suggest that it’s possible, based on reports that Twitter has hired Goldman Sachs to fend off takeover attempts.

This isn’t the first time we’ve heard about Google’s interest in Twitter. Back in 2009, Google was reportedly in late-stage negotiations to buy Twitter for $250 million. In early 2011, rumors suggested that Google, Facebook (NASDAQ: FB), and several other companies offered to buy Twitter for around $10 billion. This January, new reports claimed that Google could make an even higher offer.

Source: Pixabay

The logic behind a Twitter takeover is simple. Google’s previous social networking efforts — Orkut, Buzz, and Google+ — have been dwarfed by Facebook’s 1.39 billion monthly active users (MAUs). Facebook is capitalising on that lead with its own video-hosting platform, location-based services, payments platform, and other services. It’s tethering more third party sites and apps to its ecosystem with single sign-ons, which collect data for targeted ads. Since that growth threatens Google’s ecosystem of ads and services, it desperately needs a social solution to widen its defensive moat against Facebook.

If Google acquires Twitter, which now has a market cap of $34 billion, it would be its largest acquisition ever. But in my opinion, it’s not worth that lofty price tag. Let’s take a look at three reasons the deal would be a huge waste of money for Google.

1. It’s expensive
Twitter’s revenues more than doubled year over year to $1.4 billion in 2014. However, it reported a net loss of $645 million, up slightly from a loss of $578 million in 2013.

Last quarter, Twitter reported a net loss of $125 million, which was mostly attributed to $177 million in stock-based compensation. But surprisingly, those hefty bonuses still couldn’t prevent Twitter’s chief operating officer, chief financial officer, head of news, and head of engineering from all leaving within the past 15 months.

Twitter stock is also overvalued at current prices. Twitter trades at 24 times sales, compared to Facebook and LinkedIn‘s P/S ratios of 18 and 14. This means that Twitter could be bought at a cheaper price if fundamental gravity kicks in.

2. Stagnant user growth
Twitter’s MAU growth has slowed down considerably over the past year. Back the fourth quarter of 2013, MAUs rose 30% year over year to 241 million. But in the fourth quarter of 2014, MAUs only grew 20% to 288 million.

A recent survey by Pew Research Center also found that just 23% of American adults use Twitter, placing it in fifth place behind Facebook, LinkedIn, Pinterest, and Facebook’s Instagram, in that order.

In January, Twitter disclosed that 24 million of its users have never tweeted, meaning that they could be robots, third-party apps, or spam accounts. Moreover, there’s a huge gray market for sales of fake followers, which are created by algorithms and sold by the thousands to attention-seeking Twitter users. These problems damage Twitter’s reputation as a social network and advertising platform.

3. Google already has decent access
Twitter previously prevented Google from listing tweets in its search results. But in February, Twitter signed a deal with Google to bring tweets back to Google searches. Twitter stated that the deal would encourage new users to sign up, that it could monetize the landing pages with ads, and that it would generate additional data revenues by sending the tweets to Google.

However, the deal arguably benefited Google more than Twitter. The partnership lets Google users bypass Twitter’s revenue-generating News Feed and jump straight to the tweet. Therefore, Twitter users who regularly use Twitter’s internal search engine could start using Google to simultaneously scour tweets and other websites. Google’s search results will also be enhanced by real-time tweets, which will boost the relevance of its targeted ads.

Since that deal basically gives Google access to some of Twitter’s best features, there’s no point in buying the entire site.

Twitter’s not worth it, Google
Google’s 10 largest acquisitions in history had a combined price tag of $24.5 billion. With an acquisition premium, Twitter could cost $40 billion to $65 billion. That’s a whopping price tag for a company with no profits, high valuations, and stagnant user growth. Google certainly needs to push back against Facebook in the social media space, but buying Twitter just isn’t the answer.

The post 3 Reasons Google Inc Shouldn’t Acquire Twitter Inc appeared first on The Twelfth Magpie.

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Leo Sun owns shares of Facebook. The Motley Fool UK owns shares of Google (A shares) and Google (C shares).