Speculation that Twitter could be acquired by another company ignited after Microsoft and LinkedIn's announcement, sending the struggling company's stock up more than 8 percent at one point.
Microsoft and LinkedIn's deal, some analysts said, highlighted the importance of tech firms that attract a large following and gather a substantial amount of data about people's daily behaviors.
San Francisco-based Twitter "has stagnant growth, but they also have more than 300 million users and a plethora of information of real-time activity around the world," said James Cakmak, an analyst for Monness, Crespi, Hardt & Co.
Twitter's stock closed up 3.7 percent at $14.55 per share on Monday.
Microsoft's deal, he said, could spark more interest in purchasing other data-driven tech firms outside of social media companies too. Restaurant delivery service GrubHub, for example, has valuable information about where people dine.
Microsoft, based in Redmond, Washington, noted that LinkedIn could help them grow their office and business software tools. It's paying $196 for each share of the business-oriented social media company, a 50 percent premium on LinkedIn's closing price on Friday.
"There's a long list of companies that are trading at a significant discount relative to their growth profile and they've been left on the sidelines as the M&A appetite has been drying up. However, this deal can hopefully bring a sense of urgency to the market that wasn't there," Cakmak said.
Much like LinkedIn, Twitter's stock has taken a beating as it struggles to hit Wall Street's expectations. Facing layoffs and executive turnover, rumors have been flying for months that Twitter will end up merging with another company.
Last week, Bob Peck, an analyst at SunTrust Robinson Humphrey, noted that a Twitter sale was "inevitable" in 2017 if the company fails to turn itself around this year. Google, Facebook, Apple and traditional media companies are the most likely buyers, he wrote.
In the first quarter, Twitter reported sales of $595 million from January to March, below analysts’ expectations of $607 million. The company has 310 million monthly active users but has struggled to attract more eyeballs to the site.
Other analysts aren't reading too much into Microsoft's purchase of LinkedIn, based in Mountain View.
"Given the relative unique nature of the asset, we do not see read-throughs or direct implications from the proposed transaction for other members of our internet coverage group," wrote Peter Stabler, an analyst at Wells Fargo Securities.
While LinkedIn has also seen its stock plunge in the past year, the business-oriented social media company has had a clear focus on working professionals. Twitter, on the other hand, has struggled to define its value, although the tech firm says it's focus is on live events.
"Because (Twitter) has been trying to reposition itself and try new things, it's become less focused as a brand," said Roger Kay, president of Massachusetts-based Endpoint Technologies Associates. "You put that together with the financial metrics and you say 'Why does that make Twitter a great property?' "
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