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Will Twitter (TWTR) Benefit from SoundCloud Acquisition?

Zacks Equity Research
Updated

Per media reports,Twitter Inc TWTR might gain from the sale of music service company SoundCloud. In Jun 2016, Twitter bought a stake in the company worth $70 million.

Currently, rumors of Spotify holding talks to acquire SoundCloud are doing the rounds. Spotify is one of the biggest on demand streaming services with over 100 million active subscribers and 30 million paid subscribers. With the presence of Apple Inc. AAPL, Amazon.com Inc AMZN and Pandora Media Inc P, competition is heating up in the streaming service arena. Analysts observe that snapping up SoundCloud is a good move on part of Spotify as it will give it access to its vast library of 125 million songs.

The buyout of SoundCloud may also benefit Twitter. Reportedly, if SoundCloud is sold for more than its current $700 million valuation, then Twitter stands to benefit on account of its $70 million investment in the streaming company.

Recently, Twitter has been in the limelight given the variety of names springing up as its potential buyers. Twitter is quite different from other social media platforms. It is the go-to platform for news. One of the most important assets of the company is the vast amount of data it collects that can be leveraged by many like Alphabet, Salesforce as well as The Walt Disney Company.

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Twitter has been working on improving its fortune but with practically no success. Stagnant user base, issues with profitability and declining brand advertising revenues are its major concerns. Trolling is another menace that Twitter is fighting hard to get rid off but to no avail. Its shares have tanked 10% in the past one year.

TWITTER INC Price

TWITTER INC Price | TWITTER INC Quote

We have to add that steps like its focus on “live” and changes to its platform, though heading in the right direction, haven’t had a favorable impact on its financial performance yet. This isn’t a good sign because investors are losing patience. In fact, Twitter’s elusive turnaround has many questioning the standalone status of the company, which has resulted in numerous buyout rumors this year.

At present, Twitter is a Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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