5 Chip Stocks Could Benefit From Sector Mergers and Acquisition Activity

By Lee Jackson Published Mar 31, 10:05AM EDT

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While the news started to drift out Friday, it was confirmed this week that chip giant Intel Inc. (NASDAQ: INTC) is in talks to buy Altera Corp. (NASDAQ: ALTR). With more deals in the works and expected in the semiconductor space, and the Intel deal being lauded as a good one for both companies, many investors are wondering who are likely candidates to do a deal, or even to be acquired themselves.

A new research report from Merrill Lynch focusing on the Intel deal also gives a positive nod to potential mergers and acquisitions (M&A) activity, which the firm thinks helps support the overall multiples. The following potential beneficiaries are all rated Buy at Merrill Lynch.

Avago Technologies Ltd. (NASDAQ: AVGO) was originally a part of Hewlett-Packard, and it is a company the Merrill Lynch team thinks could be looking for additional automotive chip assets. The top radio frequency (RF) stocks have been on fire, and the Merrill Lynch price target is posted at $140. The Thomson/First Call consensus target is $139.60. Shares closed Monday at $130.55.

Broadcom Corp. (NASDAQ: BRCM) could benefit in the telecom and networking arena as an acquirer or a potential buyout candidate. The company has extensive business with Apple and Samsung. Merrill Lynch has a $50 price target and the consensus target is $48.06. The stock closed Monday at $44.11 a share.

ALSO READ: Two Very Different Analyst Views Ahead of Micron Earnings

M/A-Com Technology Holdings Corp. (NASDAQ: MTSI) is another company that could expand in the telecom and networking silo. The company currently manufactures and markets semiconductors and modules for use in wireless and wireline applications across the RF, microwave and millimeter wave spectrum. The Merrill Lynch price target is at $52, and the consensus target is $37.25. Shares closed Monday at $37.

NXP Semiconductors N.V.‘s (NASDAQ: NXPI) recent merger announcement with Freescale Semiconductor Ltd. (NYSE: FSL) was widely applauded on Wall Street, and the Merrill Lynch team thinks the company could spin out the processor division. Merrill Lynch has the stock on its US 1 list with a $114 price target, while the consensus target stands at $107.86. Shares closed most recently at $102.43.

Skyworks Solutions Inc. (NASDAQ: SWKS) may be on the lookout to do a deal that would help diversify the company away from its dependence on the mobile market. The price target for the stock is $110, and the consensus estimate is at $97.71. The stock closed the day Monday at $100.13.

ALSO READ: Can Skyworks Keep Up Its Robust Stock Performance?

The Intel deal makes good sense, as it helps the company diversify away from the big personal computer dependence. The other companies may be looking to do the same, or be in the sights of somebody looking to add their expertise.

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.