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Elon Musk-Twitter saga ‘a one-off’ for tech investors: Analyst

Wells Fargo Senior Analyst Brian Fitzgerald joins Yahoo Finance Live to discuss what Elon Musk’s agreement to purchase Twitter for $44 billion means for the social media giant, post-deal growth, innovation, and the outlook tech investors.

Video Transcript

BRIAN SOZZI: All right, let's stay on Twitter here and get some analysis on what the deal will mean for the platform in the broader social media investing landscape. Brian Fitzgerald is a Senior Analyst at Wells Fargo and joins us now. Brian, good to see you. So what does it mean? What changes might Musk make at Twitter right from the jump?

BRIAN FITZGERALD: Yeah, thanks Brian, for having us. Look, I think the whole saga was kind of a one-off. It doesn't necessarily mean that there's going to be any broader consolidation wave. Certainly was entertaining. Certainly was instructive from an M&A contract law point of view. But no real significant investment implications for our coverage.

Look, at Twitter's pace of consumer and monetization, product innovation has lagged in the recent months. You have staff departures and distractions. If those end, that's good. User growth has decelerated, per Sensor Tower data. Low single digits MAU growth in September.

But the core use case, one to many communications cultural, political interest graph, are still intact. So Twitter probably faces only imperfect substitutes and could reaccelerate growth with improved execution, assuming post-deal close, staff departures and distractions recede.

BRIAN SOZZI: And interesting. I'll just quickly note too. Our producer flagging that Twitter shares now down 2%. Of course, they also-- they rose a lot, 22.2% yesterday, but still seeing a little bit of sell off here in the premarket. But Brian, let me push back on that innovation point that you made.

Here we have an Elon Musk that is making electric cars and he's been-- he has slept repeatedly on a manufacturing plan. He's done this repeatedly. This is one of the most innovative guys in the world. Doesn't he make Twitter immediately more innovative to the point where you know what, it might hurt Snap, it might hurt Pinterest, it might hurt many other competitors in the space?

BRIAN FITZGERALD: Yeah, Brian, it's a great point. Look, if Elon does significant changes, more expansive speech rights, such changes would likely negatively impact the brand spend near-term on Twitter on a perceived decline in brand safety. Marketers would likely, we think, reduce brand spend there and redeploy it as experimental budgets on an emerging short and long form video, TikToks, Meta reels, YouTube Shorts, Snap Spotlights, Pinterest idea pins, and other emerging premium AVOD inventory sources.

So look, he has said this could be an accelerant to X, a WeChat style super app incorporating an array of media and e-commerce functionality. OK, but that will take a while to get there. Those type of offerings have been very successful in the Asian market, but attempts here have seen limited traction. As a matter of fact, Snap placed minis in kind of maintenance mode as it reduced investment amongst macro headwinds. So it's a-- there's puts and takes there. It depends on how he executes and what he does.