Twitter may want to finalize Musk deal before reporting disappointing quarter, analysts speculate

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SpaceX founder Elon Musk reacts at a post-launch news conference after the SpaceX Falcon 9 rocket, carrying the Crew Dragon spacecraft, lifted off on an uncrewed test flight to the International Space Station from the Kennedy Space Center in Cape Canaveral, Florida, U.S., March 2, 2019.
Mike Blake | Reuters

Twitter may want to finalize a takeover deal with Elon Musk ahead of the company’s Q1 earnings report on Thursday, according to analysts.

The social media giant is reportedly nearing a deal with the billionaire Tesla and SpaceX CEO. An agreement could be announced as soon as Monday, according to Bloomberg and Reuters, though there’s still the chance it could fall apart.

The company had been expected to provide an update by the time it reports its latest financial results on Thursday, if not before. Still, a disappointing quarter could be a catalyst for the company to seal a deal with Musk.

“Locking a deal up today or tomorrow may sound pretty appealing for someone who knows they are in possession of bad news,” Gordon Haskett said in a Monday note. Musk is offering $54.20 per share, while the stock was trading just above $50 Monday morning.

Wedbush analyst Dan Ives told CNBC on Monday that advertising models are slowing and subscriber growth has continued to pose a challenge. A challenging macro environment could weigh on results, KeyBanc said in an April 14 note. The company has banned advertising in Ukraine and Russia due to the war, and any softness in Europe ad spending could also hurt second quarter projections, according to a note earlier this month from MKM Partners.

“Twitter reports earnings later this week which likely will not be rainbows and smiles thus putting further pressure on the company around this game of high stakes poker with the Musk bid looming,” Ives said in a Sunday note.

CNBC’s Jim Cramer agreed, adding that he doesn’t expect the company to post a good quarter. “I think they almost have to” take the deal, Cramer said on “Squawk on the Street.”

The company had set an aggressive internal goal to reach 315 million monetizable daily active users by the end of 2023 and to at least double its annual revenue in that year. Wall Street has been skeptical of that growth target, according to a Monday note from Loop Capital.

That makes it “more difficult for the Board to argue the risk-adjusted, long-term fundamental value of TWTR substantially exceeds Musk’s current offer,” the firm said.

Musk, an avid Twitter user, has argued the company needs to be taken private so that it can transform into a free-speech forum.

Twitter declined to comment about a potential deal Monday.

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