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Twitter Inc. has a new bullish backer on Wall Street, as Rosenblatt Securities said the social media’s company’s disclosures have “flipped” the narrative, and now makes Elon Musk look like the bad guy.
Analyst Barton Crockett upgraded Twitter to buy from neutral, and raised his stock price target to $52 from $33. Crockett’s new price target is just below the $54.20 per-share price Musk agreed to pay to buy Twitter, and implies about 42% upside from current levels.
The stock
TWTR,
was up as much as 1.7% in the premarket before reversing course to be down 0.6% in morning trading, after the social media site suffered an outage due to an “internal error.” It had soared 12.6% over the past two days, after tumbling 11.3% to close July 11 at a four-month low in the wake of Musk’s announcement that he was backing out of the merger deal.
Crockett said he had previously believed there was “meaningful risk” that the $44 billion buyout agreement between Twitter and Musk, who is also chief executive officer of Tesla Inc.
TSLA,
and SpaceX, would break down, because Twitter appeared to be “evasive” in disclosing its spam bot calculations. He thought Twitter’s apparent evasiveness would give Musk leverage in court.
But Crockett said he changed his mind after Twitter sued Musk for trying to terminate the merger deal.
“We reviewed new, more detailed disclosures in Twitter’s lawsuit against Elon Musk, and our former skepticism about Twitter has been flipped,” Crockett wrote in a note to clients. “[T]witter’s disclosure of very detailed efforts to explain its spam bot calculations to Musk, and Musk’s reluctance to engage, largely ends our skepticism about Twitter, and instead makes us skeptical about Musk.”
He now believes Twitter has the leverage in court, making the stock look “unusually appealing” over the short term.
Also read: Twitter and Elon Musk set for ‘Game of Thrones’ legal batter, says Wedbush analyst.
Crockett said Musk’s assertions that Twitter was not cooperative have been “swatted aside,” as Twitter has complied with Musk’s requests for a “firehose” of data even though that was not required by the merger agreement.
“Unless Musk can show fraud, he seems to have limited outs,” Crockett wrote. “If Twitter is willing to open up as much as it testified to in the filing, fraud seems pretty unlikely.”
He said what’s more likely is that Musk is trying to “escape” a deal that is no longer appealing to him, and that the court will “force his hand” in short order. Musk could very well settle with Twitter before any court ruling.
Twitter’s stock has tumbled 18.9% over the past three months, while the S&P 500 index
SPX,
has shed 14.8%. Meanwhile, Tesla shares have slumped 29.1% the past three months.
