Analyst Has 5 Well-Known Technology Buyout Candidates

By Lee Jackson Published Feb 24, 8:15AM EST

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One great way for companies to expand growth, earnings and product offerings beyond internal organic expansion is to go the takeover route. While sometimes it can prove to be dilutive, especially if the majority of the deal is done in stock, it can also prove to be accretive by adding earnings immediately. A recent report from RBC spotlighted hundreds of stocks in multiple sectors that are small-caps that could have a very real chance of being takeover candidates.

We screened the RBC list of technology takeover candidates for the higher profile and more well-known stocks. These may prove to be solid companies to own even if they ultimately are not bought or merged. With that in mind, buying any of these companies is for accounts with a very high risk tolerance.

Advanced Micro Devices Inc. (NASDAQ: AMD) designs and integrates technology that powers millions of intelligent devices, including personal computers, tablets, game consoles and cloud servers that define the new era of surround computing. The company has had a roller-coaster ride the past couple of years, with analysts very on and off again on the company as it continues to try and remake itself. The company changed chief executives last fall in a move that rattled the markets, but it has made progress in moving to new product silos. For a larger tech company looking for a chip presence, AMD may be a solid fit.

The Thomson/First Call price target for the stock is posted at $3.11. The shares closed trading near that yesterday at $3.06.

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Ciena Corp. (NYSE: CIEN) is a company that many analysts believe could be one of the top beneficiaries of an increase in wireless spending, despite the many fits and starts investors in the stock have experienced over the years. Wall Street analysts have pointed out in recent reports that a majority of enterprise and Web/cloud data centers are in the process of running high-speed 40/100G optical interconnects between their data centers. Ciena could be a solid winner from this theme, and more than 30% of sales are not from the telecom sector. The company could be a good fit for a large-cap tech like Cisco looking to expand into this market, or a big telecom looking to expand.

The consensus price target stands at $23.90, and Ciena shares closed Monday at $20.03.

Jabil Circuit Inc. (NYSE: JBL) is the ultimate outsourcing stock for technology and more. The company offers electronics and mechanical design, production, product management and aftermarket services to companies in the aerospace, automotive, computing, consumer, defense, industrial, instrumentation, medical, networking, peripherals, solar, storage and telecommunications industries. A large-cap technology company looking to add manufacturing capacity for current and new products plus additional revenue streams might find the company very attractive.

Jabil Circuit investors are paid a 1.45% dividend. The consensus price objective is $22.93. Jabil shares closed Monday at $22.31.

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Kulicke and Soffa Industries Inc. (NASDAQ: KLIC) is a semiconductor capital equipment company that could be a fit for a chip company or a larger competitor company already in that business. The company designs, manufactures and sells capital equipment and expendable tools to assemble semiconductor devices, including integrated circuits, discrete devices, light-emitting diodes and power modules. The company posted solid fourth-quarter results back in January and could be an accretive purchase for a bigger player.

The consensus price target is $16.33, and the stock closed just below that at $16.10 a share.

ON Semiconductor Corp. (NASDAQ: ONNN) purchased Truesense Imaging last year, a provider of high-performance image sensor devices addressing a wide range of industrial end-markets, including machine vision, surveillance, traffic monitoring, medical and scientific imaging, and photography. The acquisition of Truesense Imaging strongly complements ON Semiconductor’s image-sensor business by vastly expanding its technology portfolio and adding more than 200 new customers. A larger chip company may find the company’s product line a solid fit.

The consensus price target for this Wall Street favorite is $12.42. Shares ended the trading day Monday at $12.02.

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While some of these stocks appear to have a large market capitalization to be designated small cap, they are all stocks that could feasibly make a difference at another larger firm. Again, with no guarantee anybody is interested in them, they all make reasonably good investments on their own.

About the Author Lee Jackson →

Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad and diverse career, which included a stint as the creative services director at the NBC affiliate in Austin, Texas, gives him unique insight into the financial industry and world.

Lee Jackson's journey in the financial industry spans over 30 years, with nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career was marked by his presence on the sell side during pivotal Wall Street events, from the dot.com rise and bubble to the Long Term Capital Management debacle, 9/11, and the Great Recession of 2008. This is a testament to his resilience and adaptability in the face of market volatility.

Lee Jackson’s practical financial industry experience, acquired from a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing on various platforms. This unique combination allows him to shed light on the intricacies and workings of Wall Street in a way that only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.

Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.