You've got a classic dilemma. Left to its own devices, Twitter should be lower, perhaps appreciably lower, because it doesn't have growth -- and growth is the magic elixir required of all tech companies.
But I have contended endlessly that if the management of Twitter simply thought bigger about the company and made it easier to use, it could be so much more than a place for people to banter. It could be the ultimate customer-relations tool. In fact, it could be, shy of Facebook (FB) (which, like Alphabet, is part of the Action Alerts PLUS portfolio), the best way to get in touch with and learn and teach customers about your product and what it can mean for them in a totally positive and intelligent way.
After David broke the story of the talks, a culmination of monumental reporting about what happened at a recent board meeting, critics talked about how any company would want to pay up for this company with such little growth.
Sure enough my favorite follow, Vala Afshar, chief digital evangelist for none other than Salesforce.com, posted the following personal note:
1 personal learning network— Vala Afshar (@ValaAfshar) September 23, 2016
2 the best realtime, context rich news
3 democratize intelligence
4 great place to promote others
These are all of the reasons why Twitter would be a great acquisition for any company trying to build a 360-degree, 24/7 relationship with its customers. They are all the reasons why Microsoft (MSFT) , Oracle (ORCL) , Verizon (VZ) , Salesforce, SAP (SAP) or Alphabet should be interested in acquiring the company, although the run today actually makes that transaction very costly to the acquirer. Witness the radical decline -- almost 4% -- in Salesforce shares for even the suggestion that it might buy Twitter.
I make no secret of how much I think of Twitter and am constantly suggesting that the company think bigger than it does. I have wanted Twitter to hook up with the likes of JPMorgan (JPM) so when I use my credit card in Mexico, I don't have to call customer service and tell them, "Yes it is me. That's right, no one stole my card." It's one of the more embarrassing phone calls that you can make, and I have had to make it many times. A simple direct message to me from them would have solved this over and over again.
Twitter knows more about me than just about anyone other than my wife, and if you include my fanatical sports side, then my wife's a close second; that's how much they have seen and heard from my tweets.
But they don't take advantage of it. They make it too hard to get on board. They don't mine. They don't examine. They don't think about all that it can mean for a company that wants to make a product and target ads to those who need it.
The companies being a bandied about as possible acquirers all get this, even if current management doesn't.
But everything has a price, and buying the company will crater earnings for at least several years while it is fixed to bring in the kind of revenue it could.
So, if you own it, understand that it is in rarefied territory and I am thinking four, five points up and a like amount down if nothing materializes. This is a tough recommend because it really can only be recommended on a takeover basis as the fundamentals do not support this valuation. But it's worth a great deal to the visionaries -- visionaries like Vala Afshar -- and they know a lot more about the future than we do.