Should You Cash in on Your Twitter Gains Now?

A few weeks ago, I penned down an article titled “2 Strong Acquisition Candidates for Your Portfolio”. In that article, I highlighted the fact that Twitter (TWTR) and Hain Celestial (HAIN) were both strong acquisition candidates and speculative investors should all consider adding them to their portfolios.

Hain Celestial has turned out to be a disastrous investment as the stock has plunged almost 25% since then on the back of accounting issues.
That being said, I still think Hain Celestial was an acquisition candidate and the accounting issues were most probably revealed by the company looking to buy Hain Celestial out. It was very difficult to foresee the accounting irregularities.

Nonetheless, Twitter has turned out to be a great investment as the stock has jumped almost 40% in the reference time period. Over half of the appreciation was a result of a CNBC report citing claiming that Salesforce (CRM), Alphabet (GOOG), and several others have expressed potential interest in buying out Twitter.

Twitter jumped over 21% on the news.
Should You Cash in on Your Twitter Gains Now?
Image by edisona / Pixabay
While investors may be thinking to cash out after such massive gains, I think they can probably hold out for a better deal as I can see Twitter getting acquired for a good premium.

Given that Microsoft paid a hefty premium for LinkedIn (LNKD) earlier this year, I can see Twitter going for as high as $30 a share. In addition, given that there are several potential suitors for Twitter, a bidding war can also turn out to be very rewarding for patient investors.

While I find it unlikely that Salesforce would be interested in getting into a bidding war for Twitter, the likes of Alphabet and several others may potentially drive Twitter towards the $30 mark. Hence, I think investors should not cash in just yet.

Conclusion

I expect Twitter to be sold for $28 to $30, which is why I would recommend investors to hold onto their positions. Conservative investors can take partial profits off the table or can consider hedging their positions by buying put options. However, I expect a bidding war for Twitter as the business is very valuable.

A change in leadership and management will be very beneficial for Twitter. Although Twitter is doing a great job of engaging more users recently by live streaming debates and sporting events, I think a better management can unlock great long term potential for Twitter. Thus, I still think Twitter is a buy.

Disclosure: No Position
Published on Sep 26, 2016
By Ayush Singh

Copyrighted 2016. Content published with author's permission.

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