Could these downed stocks be potential acquisition targets in 2022?


Which companies do you think could be acquired in 2022? In this segment of Backstage passregistered on January 19 contributors Rachel Warren, Jose Najarro, Trevor Jennewine and Danny Vena answer a member’s question and discuss some businesses they think could be acquired over the coming year.

Rachel Warren: ProShopGuy said, Robin Hood (NASDAQ: HOOD) has an attractive clientele. Its market capitalization fell from $50 billion to less than $12 billion. Could this be an attractive takeover target for a major brokerage firm? I do not know. It’s an interesting thought. Do any of you have any thoughts on this or are following the stock very closely?

Jose Najarro: I don’t know, but I think it would be pretty cool to enter this market, in my opinion, it would be PayPal (NASDAQ: PYPL). Maybe not a big trade. I mean, Square [Block (NYSE:SQ) has that Cash App that social platform, and they also have the ability to buy stocks. It seems PayPal might want to do something similar. They’re offering the crypto. You can buy and sell crypto in PayPal. Who knows? Maybe they want to get into the brokerage market as well.

Rachel Warren: What about you Trevor, thoughts?

Trevor Jennewine: No, I think that’s an interesting idea there. PayPal, I think they’re already moving that direction with their new mobile app. You can buy, sell, hold, pay with crypto. They’ve talked about moving into other kinds of investments, and so maybe acquiring Robinhood would be a good way to go about that.

Rachel Warren: Yeah, absolutely. I’m sorry, you had one other thought Danny?

Danny Vena: I was going to say that we saw in the news today that SoFi Technologies (NASDAQ:SOFI) was actually got its license to be an actual bank. Now you could see a potential mega merger between SoFi and Robinhood, and that could be the go-to place for millennials.

Trevor Jennewine: Yes, I think that makes sense too. On the topic of mergers and acquisitions, Danny, I know you follow Roku (NASDAQ:ROKU). Do you think it would be possible or realistic for a company like Netflix (NASDAQ:NFLX) to buy Roku?

Danny Vena: It’s interesting you asked and you’re putting me on the spot a little bit.

Rachel Warren: I’m intrigued. [laughs]

Danny Vena: I know. Do you hear that bus? [laughs] Honestly, like I said, I wouldn’t have picked Activision as a take-out target just because of the scale, the size of the company. But that said, Roku was actually a Netflix spin-off in its early days.

This was a project that Reed Hastings and Anthony Wood, the respective CEOs of Netflix and Roku, set up, and they decided whether or not to release their own set-top box. But at the time, they were afraid of alienating all the other TV and Blu-ray DVD makers that put that ubiquitous Netflix button on their remotes, so they spun it off as a separate company.

I don’t think that would necessarily be a problem now. Yeah, we could see something like that. Last time I checked, I think Roku’s market cap was 30 billion. In fact, $22 billion. Yeah, much more digestible than just a few months ago. That’s down 55%. So possible, but it would certainly be ambitious.

Trevor Jennewin: It would. It just crossed my mind. But the more I think about it, Netflix said they weren’t going to get into the ad-supported streaming service. But if they had something like Roku that already has this ad-supported streaming, I mean Netflix could use it.

He produces a lot of content. I feel like you could put some of his content on the Roku channel. There seem to be synergies. Definitely ambitious though. Do any of you have an idea on this?

Jose Najarro: I would just say that what scares me are the regulators.

Rachel Warren: To the right.

Jose Najarro: I mean, we would say that you own the streaming platform, but you also belong to one of the streaming all year itself.

Rachel Warren: Yeah, I have to wonder if that would pass. I think it’s interesting this idea with Robinhood that ProShopGuy brought up. I mean, I could definitely see like Jose was saying, maybe Square or PayPal. I mean, it fits into this ecosystem that they’re building.

Who knows? I would find that fascinating. In business terms, I think this could be a potential acquisition target.

I don’t know, it’s a company we’ll talk about a bit later. Corn Platoon (NASDAQ: PTON), may be. Who knows? I mean, it’s a company that’s going through a tough time for a lot of different reasons.

More people are going to train in person even though we are in a different phase of the pandemic. I think people could cut back on some of their discretionary spending, and some of the really expensive bikes might be a bit of a stretch for some households.

I also think we’re seeing that they’ve faced some serious headwinds in the supply chain that have caused them to raise their prices, like a lot of companies with physical products.

They’re going through a tough time, that doesn’t mean they won’t make it. But I could see some companies potentially looking at them as an acquisition target.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.


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