- Commentators have criticized Elon Musk’s bid to buy Twitter, but there are bullish arguments for the takeover.
- Musk has built blockbuster companies in the past and could bring his vision to the social platform, a Wall Street analyst said.
- Morningstar’s senior stock analyst looked at how the Musk acquisition could boost Twitter.
Elon Musk has drawn criticism for his $43 billion bid to buy Twitter, but his visionary business mind could optimize the implementation of new products and ideas for the social platform, according to a Wall Street analyst.
That could boost shares of Twitter, which are up about 19% since its 2013 IPO, well below the S&P 500’s 260% growth over the same period. Meanwhile, Musk’s empire (Tesla, SpaceX, The Boring Company, and Neuralink) has a history of achieving huge valuations and developing cutting-edge technologies.
For example, Tesla has gained more than 21,000% in the last decade and surpassed $1 trillion in market capitalization despite being the shortest stock of all time.
“Twitter has extraordinary potential. I will unlock it,” Musk said in a letter to Twitter president Bret Taylor.
In an interview with Insider, Morningstar senior equity analyst Ali Mogharabi laid out four ways Musk could improve Twitter’s fortunes.
Musk has about 83 million followers on Twitter, and given his huge success at the helm of other companies, more users are likely to flock to the platform in the event of an acquisition, Mogharabi explained.
Your popularity alone could have a significant impact on attracting and retaining people, even if you didn’t make any changes. But since Musk has spoken fervently about easing content restrictions, existing users could get more involved.
“Engagement should increase and then the increase in engagement will bring in even more users, and they will spend more time on the platform,” Mogharabi told Insider.
leadership and efficiency
Musk has transformed Tesla and SpaceX from upstarts to leaders in the auto and space industries, respectively. SpaceX is now the second most valuable private company with a valuation of $100 billion. And his tunnel construction company, the Boring Company, has just completed a $675 million funding round that values it at $5.675 billion.
It could bring that same visionary leadership to Twitter, Mogharabi said.
“Look at what he’s done with other companies, he can really bring some innovative ideas to the platform,” Mogharabi said. “New features, ways to change it, and he could do it all with the efficiency that Twitter lacked in the past.”
He added that Musk has a knack for surrounding himself with brilliant minds from all industries, which brings new perspectives. In addition, Musk would ensure that new ideas are quickly and effectively tested and implemented, as he has done at his other companies, Mogharabi said.
data and advertising
If Musk eases Twitter’s content restrictions, some advertisers may not stick around. But even if some do leave, Musk could attract new advertisers by increasing the impact of the ads.
For example, Musk could demand more efficient use of the proprietary data that Twitter collects, Mogharabi said. “That would increase the effectiveness of the ads, which could then attract more advertisers, which would then drive top-line growth.”
Twitter launched its Twitter Blue service last June, giving subscribers access to an undo button, customizable icons, and more. Musk has talked about lowering the subscription price from $3 to $2, and Mogharabi said that could attract new users and increase access to new features.
Musk also said that Twitter Blue users would get a blue checkmark, another incentive that could boost subscriptions.
Leaning on the subscription model could even raise the level of discourse, Mogharabi added, as users would be motivated to engage in higher-level conversations if they pay.
“Getting users to subscribe to Twitter could be a positive for the company and could lead to even higher levels of engagement for people who are willing to pay to use the platform,” he said.