Morgan Stanley: 3 ‘Strong Buy’ Takeover Targets In Tech

Morgan Stanley has identified tech companies most likely to get acquired in the next 12 months. Takeovers are on the rise thanks to tax cuts, which frees up cash for deals according to the bank. Indeed, acquisition intensity increased to 3.2% in Q1 from 2.5% in the previous quarter. Why does this matter? Well, share prices can soar when a takeover deal is announced- meaning that there is big value in identifying takeover targets correctly.

So with this in mind, let’s take a closer look now:

1. Ciena Corp (NYSE:CIEN)

Check out Ciena Corp, an intriguing tech stock with a focus on telecommunications. Following solid fiscal 1stquarter results, top William Blair analyst Dmitry Netis concludes that the stock has a compelling risk/reward ratio. He likes the way the company is diversifying and believes that new customer wins in new territories (such as Japan and South Korea) are a clear sign of a leading product portfolio and market share gains.

He concludes: “We argue for a better multiple for Ciena shares due to higher quality earnings, above-market growth over the next three years, a leadership position in all segments of the optical market, improving operating margins and balance sheet (through the retirement of debt), and strong free cash flows ($150 million-$200 million over each of the past two years).”

Overall, CIEN has received 9 recent buy ratings from the Street vs just 1 hold rating. These analysts see the stock spiking 15% to $31.

2. Nuance Communications (Nasdaq:NUAN)

Nuance- the company that provides the tech for Apple’s Siri, boasts 100% Street support right now. Analysts are projecting, on average, 39% upside potential from current levels. One of these analysts is Oppenheimer’s Shaul Eyal. This top 100 analyst sees big expansion potential for NUAN and explains why here:

The speech market remains relatively under-penetrated, providing significant opportunity to expand market reach. As a stock, NUAN should benefit from the company’s market-leading position and nascent opportunity in speech solutions.

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