- Quant analysts at Morgan Stanley have updated their list of tech companies that are most likely to be acquired over the next 12 months.
- For a second straight quarter in Q2, prospective buyers made more offers for tech stocks relative to the number of companies in the sector.
Compared to the first quarter, mergers and acquisitions in the US cooled in Q2, according to Morgan Stanley. But by one measure, the tech sector stood out.
Offer intensity, or the number of offers relative to the number of tech stocks, rose for a second straight quarter in Q2, according to a team of quant analysts led by Brian Hayes.
They had expected M&A activity to pick up from the first quarter given the cash that corporate tax cuts have made available to companies. And while the number of deals fell, the total value of all offers increased to $405 billion in Q2 from $312 billion the previous quarter.
The list below shows tech companies the analysts screen as most likely to be acquired over the next 12 months.
"Our model, ALERT (Acquisition Likelihood Estimate Ranking Tool), combines stock characteristics, cohort membership, and data regarding offers to forecast probabilities that stocks receive tender offers in the coming 12 months," Hayes wrote.
"On the one hand, stock-specific information, such as yield, leverage and valuation, impacts stocks' offer likelihoods; on the other hand, recent activity levels in the cohorts to which a stock belongs (e.g., sector and size) tend to continue for some time, and this affects subsequent offer intensities for remaining stocks in those cohorts."
Cypress Semiconductor
Ticker:CY
Market cap: $6.05 billion
Closing price on 7/25: $16.71
First Solar
Ticker:FSLR
Market cap: $5.55 billion
Closing price on 7/25: $54.04
Pure Storage
Ticker:PSTG
Market cap: $4.07 billion
Closing price on 7/25: $23.10
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