Yahoo Finance Elon Musk's Twitter goals have 'very low probability' of success, analyst says
Elon Musk's financial targets for a private Twitter border on absurd, contends one long-time tech analyst who covers the social media platform.
"We see a very low probability of Twitter achieving Elon Musk's reported targets," Jefferies' Brent Thill stated in a note to clients.
The New York Times obtained Elon’s pitch-deck for Twitter, and it’s solid fodder.
Musk has a vision to quintuple Twitter’s sales to $26.4 billion by 2028 on a user base of 931 million (compared to 217 million to end last year). Twitter would haul in $1.3 billion from a not-yet-released payments business by 2028, up from $15 million in 2023. Musk also aims to have 11,072 employees at Twitter by 2025 compared to about 7,500 today.
Thill declared shenanigans on the projections.
"We note that Twitter has never grown at a 27%+ revenue CAGR [compound annual growth rate] with a comparable [revenue] base," Thill explained, adding that "Musk's reported ambitions to switch to an ad and subscription model would likely pose a significant rev headwind and make it difficult to achieve these targets."
Thill then broke it down further: "For Twitter to reach Musk's goal of 600 million users by 2025, it would need to grow mDAUs at a 27% CAGR (2021-2025 estimate) and at a 23% CAGR (2021-2028 estimate) to reach nearly 1 billion users. Despite Twitter having never grown mDAUs at a 23%+ CAGR in consecutive years, Musk plans to for 7 years with a substantially larger user base. We note that no social platform in our coverage has been able to grow DAUs at a 20%+ CAGR in recent years. Additionally, Twitter lacks popularity among the younger demographic, which Musk will need to attract to meet these targets."
Musk acquired a 9.2% stake in Twitter in early April before striking a deal to buy the social media platform for $54.20 a share, or about $44 billion, a few weeks later. Musk has said that the platform should be less reliant on advertising sales and better police content.
But whether Musk will get to even bring his lofty vision for Twitter to life is now very uncertain.
The unpredictable billionaire said Friday the Twitter deal was on "hold" as more diligence is done on whether less than 5% of Twitter's users are fake accounts (as the company's SEC filings have stated).
Twitter stock fell 9.67% to $40.72 on the session.
Musk said he is still committed to the deal.
"The bots are angry at being counted," he tweeted late Friday.
Wall Street pros such as Thill believe this latest turn in the Twitter saga is Musk trying to negotiate a lower purchase price amid a steep pullback in tech valuations the past month.
"We believe Elon Musk is putting the deal on hold to negotiate a lower price," Thill added. "Our analysis of Twitter's filings shows that spam / false accounts have consistently been <5% of total mDAUs. It is possible that Musk is investigating these claims to find a reason to pay a price below the prior 'best and final' $54.20 offer."
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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