After Cisco Makes Daring Last-Minute M&A Buy, Are These Hot Companies Next?

By Lee Jackson Updated Jan 12, 3:29PM EST · Published Jan 26, 10:20AM EST

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After Cisco Makes Daring Last-Minute M&A Buy, Are These Hot Companies Next? — © Thinkstock

[cnxvideo id=”625445″ placement=”ros”]The hottest tech initial public offering (IPO) deal in weeks was due to price this week, but tech giant Cisco Systems Inc. (NASDAQ: CSCO) put the kibosh on that yesterday when it bought AppDynamics two days before its debut as a public company for a reported $3.7 billion in cash and equity.

In a move that rarely happens, Cisco stepped in front of the IPO and offered approximately twice what the offering would have brought the company. The question for investors is who could be next? In a timely research note, the analysts at Stifel think more mergers and acquisitions could indeed be on the way. The also think the small and midcap companies are the likely targets.

Stifel cited 15 possible targets, but here we focus on five that are Buy rated and have had positive traction in their respective technology subsectors.

Barracuda Networks

This company recently reported very solid earnings. Barracuda Networks Inc. (NASDAQ: CUDA) designs and delivers security and data protection solutions. The company offers cloud-enabled solutions that enable customers address security threats, improve network performance, and protect and store their data.

Barracuda recently launched its new Vulnerability Remediation Service, expanding its award-winning Wed Activation Firewall product line further simplifying the way web application security is deployed and managed. The Vulnerability Remediation Service automates security policy enforcement, making application security easy for DevOps teams by reducing costs and complexities traditionally associated with auditing code or patching software.

The Stifel price target for the stock is $32, and the Wall Street consensus target is $29.29. The stock closed Wednesday at $23.76 per share.

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FireEye

This stock was on fire a couple of years ago and has been absolutely eviscerated since. FireEye Inc. (NASDAQ: FEYE) has been mentioned over the years as a takeover target, and trading 85% below highs that were printed this time three years ago, it may indeed be on the radar.

The company provides cybersecurity solutions for detecting, preventing, analyzing and resolving cyberattacks. The company offers vector-specific appliance solutions that provide threat protection from network to endpoint for inbound and outbound network traffic that may contain sensitive information.

FireEye also offers Central Management System that provides cross-enterprise threat data correlation to identify and block attacks across multiple attack vectors. Its Threat Analytics Platform helps to identify and respond to cyber threats by correlating enterprise-generated security event data from any security product with real-time threat intelligence, and its Malware Analysis System helps to manually execute and inspect advanced malware, zero-day and other advanced cyberattacks embedded in files, email attachments and web objects.

Stifel has a $20 price target on the stock, and the consensus target is $16.58. The stock closed most recently at $13.02 a share.

HubSpot

This stock has sold off some since November and is offering a nice entry point. HubSpot Inc. (NYSE: HUBS) provides a cloud-based marketing and sales software platform for businesses in the Americas, Europe and the Asia-Pacific. Its software platform includes integrated applications, such as social media, search engine optimization, blogging, website content management, marketing automation, email, customer relationship management, analytics and reporting that enables businesses to attract visitors to their websites, convert visitors into leads and close leads into customers. The company also offers professional and phone and email-based support services.

The company posted strong billings growth of 48% when it reported in November. The company also had an impressive 20% increase in net new customers. The company’s pro sales product now has about 5,000 customers, and it is becoming a contributor to growth and has great potential to improve unit retention across the base.

The $62 Stifel price target is lower than the consensus target of $65.26. The shares closed most recently at $53.40.

SecureWorks

This smaller cap company had a 2016 IPO and could potentially explode for investors this year. SecureWorks Corp. (NASDAQ: SCWX) is a security services carve-out of Dell, and it offers its global customers security services, outsourcing and consulting. The company is a leader in the $8.7 billion managed security services market, and it also addresses the broader IT security outsourcing and consulting markets.

The company combines its proprietary software platform, the Counter Threat Platform, with its internal security experts to remotely monitor and manage customer-owned security appliances.

SecureWorks reported third-quarter results were better than expected, and the forward guidance was in line, but some revenue and customer metrics were lackluster. Margin improvement and consistent performance was likely overshadowed by decelerating revenue and customer growth. Top analysts believe the company remains positioned to expand further into larger enterprises and internationally.

The Stifel price target is set at $18, while the consensus target is $15.09. The shares closed most recently at $10.63.

Tableau Software

This red-hot stock also has been a rumored takeover target for some time. Tableau Software Inc. (NASDAQ: DATA) provides business analytics software products in the United States, Canada and elsewhere. The company offers Tableau Desktop, a self-service analytics environment that empowers people to access and analyze data independently, and Tableau Server and Tableau Public, a free cloud-based platform for analyzing and sharing public data.

The company’s business intelligence platform with data management and scalability has the security to foster the sharing of data. The stock was more than cut in half from highs printed in the summer of 2015, and it may really be a value for a larger company looking to expand its data analytics presence.

The $75 Stifel price target is much higher than the consensus target if $54.44. The stock closed trading on Wednesday at $47.84.

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These are awesome companies, and while it would be huge if they were bought, they all have strong franchises moving forward and can stand on their own. They are, however, only appropriate for extremely aggressive accounts.

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.