RBC Sees 4 Software Stocks as Potential Takeover Candidates

By Lee Jackson Updated Jan 12, 2:16AM EST · Published Mar 20, 10:55AM EDT

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RBC Sees 4 Software Stocks as Potential Takeover Candidates — © Thinkstock

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 last month’s market sell-off may already 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 that were acquired over the following 12 months.

One screen that should be of interest to many investors is the potential buyout candidates in the software and services segment. With constant new innovations to increase productivity, and a need in the health care business to add solutions to make work more accurate, it makes sense that larger companies would be looking to add new capabilities and technology.

We cross-referenced the RBC potential takeout candidates, looking for the highest profile names, and found four that like solid choices.

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Allscripts

This company has been sold-off and could be a very tempting target now. Allscripts Healthcare Solutions Inc. (NASDAQ: MDRX) provides IT and services to health care organizations in the United States, Canada and internationally. It offers electronic health records, connectivity, hosting, outsourcing, analytics, patient engagement, clinical decision support and population health management solutions.

The company’s Clinical and Financial Solutions segment provides integrated clinical software applications and financial and information solutions, which primarily include electronic health record (EHR) related and financial and practice management software solutions, as well as related installation, support and maintenance, outsourcing, hosting, revenue cycle management, training and electronic claims administration services.

Top Wall Street analysts have noted that the growing adoption of Allscripts’ population health management and EHR solutions bodes well for the company’s overall prospects.

The Wall Street consensus price target is $16.68. The shares traded early Tuesday at $12.90, in a 52-week range of $11.25 to $16.13.

J2 Global

This company has been mentioned often over the years as a possible target due to the firm’s strong cloud presence. J2 Global Inc. (NASDAQ: JCOM), together with its subsidiaries, is a provider of internet services. The company operates through two segments

Through its Business Cloud Services Division, J2 Global provides cloud services to businesses of all sizes, from individuals to enterprises, and licenses its intellectual property (IP) to third parties. The Digital Media Division specializes in the technology and gaming markets, reaching in-market buyers and influencers in both the consumer and business-to-business space.

The consensus price objective is $98.33, and the shares traded at $80.60 on Tuesday. The 52-week trading range is $70.27 to $91.48.

Omnicell

This company also has made the RBC list over the years and remains a very solid candidate. Omnicell Inc. (NASDAQ: OMCL) is a leader in medication and supply dispensing automation, central pharmacy automation, IV robotics, analytics software and medication adherence and packaging systems. Omnicell is focused on improving care across the entire health care continuum, from the acute care hospital setting to post-acute skilled nursing and long-term care facilities, to the patient’s home.

Over 4,000 customers worldwide use Omnicell automation and analytics solutions to increase operational efficiency, reduce medication errors, deliver actionable intelligence and improve patient safety. Omnicell’s innovative medication adherence solutions, used by over 32,000 institutional and retail pharmacies in North America and the United Kingdom, are designed to improve patient adherence to prescriptions, helping to reduce costly hospital readmissions.

The consensus price target is $54.38. The shares were last seen at $43.05, in a 52-week range of $38.00 to $55.40.

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Teradata

This top analytics company could be an easy bolt-on for a larger big data company. Teradata Corp. (NYSE: TDC) is one of the global leaders in data warehousing. Its solutions include software, hardware and related business consulting and support services. The company’s focus on business solutions for analytics, coupled with industry-leading technology and architecture expertise, makes it an in-demand service provider.

Teradata recently announced it is working with Cisco Systems on a digital transformation solution with a focus on smart cities and communities. Combining the merits of Cisco’s Internet of Things platform, Cisco Kinetic for Cities, with the Teradata Analytics Platform, the solution will help cities become smarter and more connected by providing a powerful solution for integrated data exchange.

The stock traded at $42.45 on Tuesday, above the consensus target price of $37.19. The 52-week trading range for the shares is $27.05 to $42.84.

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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 take-out factor just gives them another reason to be considered.

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.