After SAP Purchase of Concur, Are These Stocks the Next Targets?

In a new research note from FBR, the analysts think that the “stage is set” for the enterprise software deal landscape to heat up, with this current match-up potentially igniting the next phase of software consolidation. They feel that the market is ripe for consolidation, especially when many of the mega-cap tech leaders need to improve growth and expand their business silos, and most importantly they have the deep pockets and cash to do so.

The FBR research listed numerous scenarios, and all of them make sense. We screened for the five top names that have the highest earnings growth rate.

Demandware Inc. (NYSE: DWRE) is expected to see a huge leap on the top and bottom lines next year. The stock also got a nice boost recently when Goldman Sachs upgraded the e-commerce software service provider to Buy from Neutral. FBR thinks the stock could get interest from Salesforce.com. The Thomson/First Call price target for Demandware is $70.64. The shares closed trading Friday at $55.20.

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Fortinet Inc. (NASDAQ: FTNT) is a top cyber-security name that posted very good first- and second-quarter results, both on the top and bottom line. A nice rally off the low has lifted the stock back to 52-week highs. Wall Street analysts cite not only a pending product refresh cycle, but they point out that the information technology (IT) security market is a robust and growing sector.

The FBR team thinks the company could be a very good fit for storage giant EMC, which has 7.65 billion in cash. There is some chatter of EMC selling or at least spinning off its huge stake in VMware, which could generate even more cash. The consensus price target for Fortinet is $28.75. The stock closed on Friday at $26.42.

Imperva Inc. (NYSE: IMPV) products fill the gaps in endpoint and network security by directly protecting high-value applications and data assets in physical and virtual data centers. Many on Wall Street believe the stock is still a “show-me” story, where they have to prove that product strategy and execution is back on track.

With that said, the FBR team thinks that Imperva has the kind of products that could interest Microsoft. The consensus price target for the stock is $34.18. The shares closed on Friday at $30.57.

Splunk Inc. (NASDAQ: SPLK) reported first-quarter total revenue of $99.9 million, up 53% year-over-year, while the second quarter also came in red-hot, with much better-than-expected results. With those kinds of solid revenues, the company could start to look attractive to a mega-cap tech.

The FBR team thinks that a fit with IBM could be a possibility. It makes sense that IBM would be looking to reignite earnings growth through an acquisition, and it has cash and stock to do it with. The consensus price target for Splunk is $66.56, and shares closed on Friday at $56.21.

Qlik Technologies Inc. (NASDAQ: QLIK) is another fast-rising tech name catching a buzz on Wall Street. The company’s QlikView Business Discovery platform lets people quickly bring data sources together to create dynamic visual applications that can be navigated and searched intuitively. QlikView uses natural analytics to reflect the way human curiosity searches and processes information, while delivering the enterprise manageability, governance and service offerings organizations require.

FBR thinks that Qlik might be another stock that SAP would have an interest in, to expand a big data offering. Given the deep-pockets and the value of the stock, it seems probable it could make another acquisition. The consensus price target for Qlik is $30.81. The stock closed on Friday at $27.36.

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It is important to remember that while the analysts at FBR think that these would be good fits, and they do expect a software consolidation phase to kick in as early as next year, these are only educated guesses on what could happen down the road.