Citi sees 40% downside in Twitter with no takeover bid

Citi analyst Mark May believes Twitter's (TWTR) risk/reward skews to the downside following the recent rally in the shares.

A buyout of the company carries "strategic rationale for certain companies," but Twitter's "struggles and steep valuation" make a deal at a meaningful premium less likely, May tells investors in a research note. A takeover at $26 per share looks aggressive, May contends. He believes the stock could retest the lows of late May, representing 40% downside from current levels, should an acquisition offer not materialize. The analyst keeps a Neutral rating on Twitter with a $16 price target.

The shares closed yesterday up 75c to $23.37 following reports that Disney (DIS) may be joining the list of potential acquires that already includes Alphabet (GOOG) and Salesforce (CRM).