Twitter slips as Truist downgrades on valuation ahead of Q1 results
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Twitter (NYSE:TWTR) shares slipped on Thursday after investment firm Truist downgraded the stock, citing concerns over valuation and worries over headwinds linked to foreign exchange and Russia's invasion of Ukraine.
Analyst Youssef Squali lowered his rating to hold from buy, but kept the $50 price target, noting that the stock approached the level due to Elon Musk's offer to buy the company for $54.20 per share in cash, which the analyst viewed as "fair, all things considered."
Twitter (TWTR) shares fell more than 1.5% to $45.98 in premarket trading on Thursday.
Squali added that it could be possible that Musk fails in his effort to buy Twitter (TWTR), but a competing bid is unlikely due to the fact that certain strategic companies, like Google (GOOG) (GOOGL) and Microsoft (MSFT) are "restricted" in their ability to do more deals.
Additionally, the size of the investment, at roughly $43 billion, would be onerous to all but a few potential acquirers.
Looking ahead to first-quarter earnings, Squali said Twitter (TWTR) is likely to report "in line" with estimates, but there are concerns about foreign exchange and the Russian invasion of Ukraine, though those are likely to be short-term in nature.
"With ~9 [million] users in Russia, roughly 5% of its international user base and 4% of its global base, we estimate that TWTR generates 1-2% of its revenue in Russia and Ukraine, and with the service blocked in Russia starting in early March, we would expect the revenue loss at less than 1% of total revenue," Squali wrote in the note.
Concerning any potential from Apple's (AAPL) changes to iOS that have impacted Meta Platforms (FB), Squali said Twitter is "somewhat insulated," given it skews more towards brand advertising.
On Wednesday, Musk dropped another hint that he could put forth a tender offer for Twitter (TWTR), tweeting "_______ is the Night."