It happens every year, and 2018 won’t be any different. Larger companies looking to add to growth in addition to that of the organic or internal variety scan the field for purchases and acquisitions that are easy to bolt on and could add returns in a timely fashion. This year the process may even speed up some as the market sell-off that happened last month already may have put some companies in the sights of acquirers.
In what is a yearly and very all-encompassing report, the analysts at RBC again go through every sector looking for possible buyout candidates. Last year, the company’s takeover screens yielded 20 takeouts that were eventually acquired over the following 12 months.
One screen that should be of interest to many investors is the potential buyout candidates in the optical and networking sectors. With constant new innovations, and a growing dependence on the cloud for storage, computing, data and content streaming, and much more, the chances for mergers and acquisitions activity to jump are for real.
We cross-referenced the RBC potential takeout candidates seeking the highest profile names and found five that look like solid choices.
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Acacia Communications
This red-hot IPO from 2016 has backed up huge over the past two years. Acacia Communications Inc. (NASDAQ: ACIA) is a leading supplier of high-speed coherent optical interconnect products to network equipment manufacturers, hyperscale cloud companies and service providers.
The company’s foundation is in its Digital Signal Processing (DSP) and a unique approach with its silicon-based photonic integrated circuit (SiPhi PIC). The company primarily combines the DSP and PIC to create modules, which are integrated into optical/networking equipment to provide high-speed optical interconnect.
The Wall Street consensus price target is $44.09. The shares closed last Friday at $43.92. The 52-week trading range for the shares is $33.68 to $61.15.
Ciena
This company has had a very up and down 52 weeks and frequently has been the subject of takeover rumors. Ciena Corp. (NASDAQ: CIEN) is a vendor for high-capacity optical transport and Ethernet switching equipment to carriers, enterprises, cable operators and governments. It specializes in transitioning legacy communications networks to converged, next-generation architectures capable of efficiently delivering a broader mix of high bandwidth services.
The company’s Converged Packet Optical segment offers networking solutions optimized for the convergence of coherent optical transport, Optical Transport Network (OTN) switching and packet switching. Its products comprise the 6500 Packet-Optical Platform, 5430 Reconfigurable Switching System, CoreDirector Multiservice Optical Switches and OTN configuration for the 5410 Reconfigurable Switching System.
Top analysts feel that Verizon’s metro 100G buildout will be a focus for 2018, and the company could see catch-up spend from the now combined Centurylink. In addition, the new Waveserver products likely will continue to ramp as additional customers are added.
The consensus target price is $30.01. The shares closed trading on Friday at $27.20, in a 52-week range of $19.40 to $27.98.
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Finisar
This stock was hit hard recently and may be offering a very good entry point for investors. Finisar Corp. (NASDAQ: FNSR) provides optical subsystems and components for data communication and telecommunication applications in the United States, Malaysia, China and elsewhere.
The company’s optical subsystems primarily consist of transmitters, receivers, transceivers, transponders and active optical cables that provide the fundamental optical-electrical or optoelectronic interface for interconnecting the electronic equipment used in communication networks, including the switches, routers and servers used in wireline networks, as well as the antennas and base stations used in wireless networks.
The company also offers wavelength selective switches, which are used to switch network traffic from one optical fiber to multiple other fibers without converting to an electronic signal. In addition, it provides optical components comprising packaged lasers, receivers and photodetectors for data communication and telecommunication
applications, as well as passive optical components for telecommunication applications.
The consensus price objective of $21.32 compares with last Friday’s closing price of $18.07 a share. The 52-week range is $16.64 to $29.07.
Netgear
This company has made the RBC list before and again is a possible takeover candidate. Netgear Inc. (NASDAQ: NTGR) designs, develops and markets networking solutions and smart connected products for consumers, businesses and service providers. The company’s product line consists of devices, such as network attached storage, internet protocol security cameras and home automation devices and services.
Netgear’s segments include retail, commercial and service provider. The retail business unit is focused on individual consumers and consists of whole-home wireless fidelity (Wi-Fi) networking solutions and Smart connected products.
The commercial business unit is focused on small and medium-sized businesses and consists of business networking, storage and security solutions. While the service provider business unit is focused on the service provider market and consists of made-to-order and retail-proven whole home networking hardware and software solutions, including fourth-generation (4G) long-term evolution (LTE) hotspots sold to service providers for sale to their subscribers.
The posted consensus target was last seen at $75.50. The share price on Friday’s close was $59.15, in a 52-week trading range of $41.50 to $71.42.
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Verint Systems
This company has been a part of takeover chatter over the past year. Verint Systems Inc. (NASDAQ: VRNT) is a provider of customer engagement software and services that can be deployed on-premises or in the cloud. It delivers its Actionable Intelligence solutions through two operating segments: Customer Engagement Solutions and Cyber Intelligence Solutions. Its Customer Engagement vision is powered by its Actionable Intelligence platform to generate intelligence from structured and unstructured data.
Verint Systems offers solutions that help organizations empower their customers and employees through intelligence that can be shared enterprise-wide. It is a provider of security and intelligence data mining software. Its solutions are used for a range of applications, including predictive intelligence, advanced and complex investigations, security threat analysis and electronic data and physical assets protection, as well as for generating legal evidence and preventing criminal activity and terrorism.
The Wall Street consensus price target is posted at $48. The shares closed Friday at $39.45, in a 52-week range of $37.05 to $44.70.
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While there is absolutely no guarantee that these companies are acquired, they all are outstanding stocks to own in aggressive growth portfolios on their own. The buyout factor just gives them another reason to be considered.
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