According to Bloomberg data, US corporations participated in $2.5 trillion worth of takeovers in 2021. This easily beats the prior record of $1.96 trillion achieved in 2015.
So that will be tough to beat, but it looks like 2022 will be another year of brisk business. On a historical basis, borrowing costs should stay relatively cheap, even while the Fed is expected to raise its interest rate several times this year. And companies aren’t lacking for firepower, with many big names boasting healthy balance sheets, boosted by the US’ solid economic recovery, which appears set to keep pushing ahead in 2022.
We’ve already had Microsoft intent on scooping up Activision, and Sony is keen on bringing Bungie under the fold, so which other companies could be ripe for the picking?
The Street’s analysts have earmarked several names which could turn up on other companies’ shopping lists. Using TipRanks’ database, we did a deep dive into the data to find out what makes them so attractive.
The first name which could make for a strong acquisition candidate operates in a segment which has already seen robust activity this year — mobile gaming. Playtika develops and publishes mobile casino games, and boasts 35 million monthly active users. Its portfolio includes puzzle video game Best Fiends, Bingo Blitz, Slotomania, and Caesars Slots, amongst others. Apart from distributing its games via its own proprietary platforms, it also does so through a variety of web and mobile platforms, such as Apple, Facebook, and Google.
Playtika entered the public markets in early 2021 and, like many, endured a tough 12 months. The past year has seen the stock shed 47% of its value.
Some lackluster earnings haven’t helped matters, either. The latest, for 3Q21, saw the company miss on both the top and bottom-line. Revenue of $635.9 million fell short of Street expectations by $26.07 million, while EPS of $0.20 came in $0.05 below the analysts’ call.
Nevertheless, Davidson analyst Franco Granda thinks that following the recent acquisition activity in the gaming space, it is clear the segment is more than just a fad.
“With gaming becoming the fastest and largest forms of entertainment we believe activity will remain red-hot,” said the analyst, who sees the pure-play mobile gaming player as a “potential” M&A candidate. “PLTK has a best-in-class gaming portfolio and financial profile and is of similar scale to ZNGA,” Granda explained. “We believe a potential take-out multiple for PLTK could range between 4x-5x EV/’22E sales, or $25-$30 per share.”
To this end, Granda rates PLTK shares a Buy and his $25 price target suggests room for ~53% upside in the year ahead. (To watch Granda’s track record, click here)
The Street’s average target is even higher and right at the high end of Granda’s anticipated take-out price; at $29.33, the figure suggests shares will rise ~79% over the next 12 months. Overall, based on Buys only – 6, in total – the stock has a Strong buy consensus rating. (See Playtika stock forecast on TipRanks)
Euronet Worldwide (EEFT)
Next up, we have Euronet Worldwide, an electronic payment services provider. The company’s offerings run the gamut of payment solutions spanning from automated teller machines (ATM), and point of sale (POS) services, to credit/debit card services, currency exchange and a variety of electronic payments software and financial services. The company operates across 170 countries, boasting over 330,000 EFT point-of-sale terminals and serving more than 50,000 ATMs.
Euronet will report Q4 earnings later this week (Thursday, Feb 6), and investors will be hoping to see emulation of Q3’s display. The company showed a big sequential improvement while delivering beats on both the top-and bottom-line. Revenue increased by 23% year-over-year to reach $816.6 million, in the process beating the consensus estimate by $33.13 million. At $1.77, adj. EPS came in ahead of Wall Street’s forecast by $0.35.
Among the fans is Truist analyst Andrew Jeffrey, who sees Euronet as “one of the best managed, most underappreciated companies in the space.”
The 5-star analyst believes that some investors might shy away from this name due to ongoing developments in the payments space, whilst highlighting that European COVID disruptions could still be a “headwind.” However, he also lays out the case why the company represents a sound investment right now and could make for a good acquisition pick.
“We concede that pandemic has pulled forward digital trends and is likely eating into European cash demand, even if there remains a long tail in developing markets. We also believe a strong cx-border recovery is not reflected in analyst estimates or the stock’s rough parity valuation compared with its five-year pre-pandemic NTM average,” the analyst explained. “Even if we have to again push out a cx-border recovery, we see little downside risk to our C22 EPS estimate, and given what we consider burgeoning franchise value, Euronet could be an attractive takeover target.”
Accordingly, Jeffrey rates EEFT a Buy and backs it up with a $185 price target. If it gets there, Euronet stock could return ~36% gain over the course of the next year. (To watch Jeffrey’s track record, click here)
Does the Street agree with Truist’s outlook? It appears so. All 5 analyst reviews on record are positive, making for a Strong Buy consensus rating. The average price target stands at $171.25, suggesting ~26% in the year ahead. (See Euronet stock forecast on TipRanks)
Contango ORE (CTGO)
For the last stock on our list, we’ll shift gears into the gold mining industry. Contango ORE boasts a portfolio of exploration and development-stage assets it owns across Alaska, but one particular project informs Cantor’s Mike Kozak’s bull thesis.
The company has a 30% stake in the Manh Choh gold project in Alaska, which is being developed by Kinross. For Cotango, the project will involve “exceptionally low capital intensity,” given there will be no mill or tailings facility at the Manh Choh site as the Ore from the high-grade open-pit will be transferred across 250 miles to be treated at Kinross’ Fort Knox processing plant.
With a large-cap partner laying out most of the initial capital, a project that at extremely low operating costs is on course to become the world’s “highest grade open-pit gold mine,” and with pre-existing infrastructure that will ensure the permitting and the construction period will be far less complicated, Kozak believes Contango Ore is “in a position envied by virtually every development-stage mining company.” And all this while the project is located in a tier-one mining region.
From an investment point of view, there is also the fact the stock was only recently up listed to the NYSE, means Conatnago is still “under the radar” of most precious metal investors.
All in all, Kozak thinks it only makes sense that a larger player will scoop up this company in a heartbeat.
“Given its Tier 1 mining jurisdiction and best-in-the-world open-pit gold grade, Contango’s 30%-interest in the Manh Choh project should be highly sought after by virtually every operating gold mining company save for the largest-tier miners who have M&A production size thresholds,” the analyst said. “Contango is a natural ‘roll-up’ candidate for Kinross, and a highly likely takeover candidate in our view for any and all gold mining companies with Kinross’ market cap ($6.7 BB) and lower.”
What does it all mean for investors? Kozak rates CTGO a Buy and backs it up with a $37.5 price target. Should the figure be met, investors are looking at one-year gains of ~76%. (To watch Kozak’s track record, click here)
Some stocks fly under the radar, and CTGO is one of those. Kozak’s is the only recent analyst review of this company, and it is decidedly positive.
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.