Deal Or No Deal: Bob Peck Breaks Down What A Premium For Twitter Would Look Like Now

Salesforce (NYSE: CRM), Alphabet Inc (NASDAQ: GOOG), Walt Disney Co (NYSE: DIS) and Microsoft Corporation (NASDAQ: MSFT) are the latest names to be tossed around in Twitter Inc (NYSE: TWTR) takeover speculation. It's been enough to drive the stock up more than 25 percent over the last two trading sessions.

SunTrust analyst Bob Peck weighed on the reports and what it means for the stock. In a note released Monday afternoon, the analyst said Twitter's valuation has decoupled from fundamentals and believes these takeover reports have created unequal risk-reward.

Related Link: Here Is Every Twitter Takeover Rumor Of 2016

"Typically when a potential deal is actively discussed in mainstream media prior to announcement (pushing the price higher), the premium paid is stated vs. a prior period closing price moving average," said Peck. "For Twitter, we looked at the 30, 60 and 90 day averages and used 40% as a takeout premium. That level of premium would drive prices of $27, $26, and $24 - close to the original $26 IPO price and only up 3% to 15% from today’s price. Further, $26 share price would represent ~$20B transaction value, 22x EV/EBITDA (ignoring excess SBC) and 6.1x EV/Sales on 2017 street estimates – a slight premium to LinkedIn’s takeout multiples."

However, should Twitter clarify it's not for sale, shares could trade back down to the $18 level.

Peck maintain the firm's Neutral rating and $18 price target. The stock closed Monday at $23.37, up 3.2 percent on the day.

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