3 Stocks Riding the M&A Wave to Riches

Stocks to buy

Matterport (NASDAQ:MTTR) got put out of its misery with the M&A stock news on April 22 that Washington D.C.-based CoStar Group (NASDAQ:CSGP) was buying the provider of spatial property data for $5.50 a share ($1.6 billion enterprise value) with half in cash and the other half in CoStar stock.

CoStar, whose 27 brands — CoStar, LoopNet, Apartments.com, Homes.com, OnTheMarket, Ten-X, STR. Land.com and BizBuySell — are a few that provide proprietary real estate information to more than 100 million unique monthly users.

Key to the acquisition is Cortex, Matterport’s artificial intelligence solution. 

“At the center of the solution is Cortex, a powerful artificial intelligence software engine that automatically generates the 3D digital twin and virtual tour while providing property insights like detailed property dimensions, room layouts, and more,” stated CoStar’s press release announcing the acquisition.

The company’s spatial property data includes over 12 million spaces across 38 billion square feet of digital property. 

In Nov. 2021, MTTR stock traded near $30. It’s traded below $5 since 2022. It’s a smart buy for CoStar. 

Here are three other M&A stocks that are smart plays in 2024.

JD Sports (JDSPY)

Source: Shutterstock

On April 23, UK omnichannel sports fashion retailer JD Sports (OTCMKTS:JDSPY) announced that it would acquire Birmingham-based Hibbett (NASDAQ:HIBB) for $87.50 a share, a 21% premium to its April 22 closing price.

Including the assumption of debt, the enterprise value for Hibbett is $1.1 billion. 

“We’re thrilled to acquire Hibbett | City Gear, combining two of the most respected athletic retail brands in the United States, as we continue to strategically expand our global multi-brand platform,” stated JD Sports CEO Régis Schultz in the joint press release.  

“With Hibbett’s highly complementary footprint, this transaction represents a logical next step in our strategic growth plans, further enabling us to meet the dynamic demands of consumers globally.”

I last recommended Hibbett stock last August, stating that while I’d never recommended the stock for InvestorPlace readers before, I knew it was very streaky. Down around $37.50, I thought it made sense to buy HIBB. It’s up more than 133% in the eight months since.

JD Sports currently has 3,313 stores worldwide. Hibbett adds another 1,169 across 36 states, strengthening the UK company’s grip on U.S. sports apparel retail. 

It’s a homerun buy for JD shareholders.  

Tapestry (TPR)

Source: TY Lim / Shutterstock.com

It’s been eight months since Tapestry (NYSE:TPR), the owners of Coach, Kate Spade, and Stuart Weitzman, offered to buy Capri Holdings (NYSE:CPRI), the owners of Michael Kors, Versace, and Jimmy Choo, for $8.5 billion.

Together, the two firms would be a North American luxury fashion conglomerate with over $12 billion in annual revenue, more than plenty to compete with Europe’s big luxury operators such as LVMH (OTCMKTS:LVMUY). 

“We are ready to leverage our competitive advantages across a broader portfolio of brands,” said Tapestry CEO Joanne Crevoiserat in a statement last August. “The combination of Coach, Kate Spade, and Stuart Weitzman together with Versace, Jimmy Choo, and Michael Kors creates a new powerful global luxury house, unlocking a unique opportunity to drive enhanced value for our consumers, employees, communities, and shareholders around the world.”

The deal made so much sense at the time. Unfortunately, there was some regulatory concern, and that issue reared its ugly head on April 22 when the Federal Trade Commission sued to block the merger. 

The FTC feels the combination would lower wages, cut employee benefits, raise prices for accessible luxury handbags, etc. Tapestry doesn’t see it that way, and neither do I. 

It’s a waste of taxpayer money to pursue this particular M&A situation. Whether successful or not, Tapestry was wise to make the bid. At worst, it will cost the company $50 million in expenses, which will have to pay to Capri. 

That’s petty cash for a deal that still could be approved by the FTC when all is said and done. 

T-Mobile (TMUS)

Source: Shutterstock

It’s taken a year, but it appears T-Mobile’s (NASDAQ:TMUS) acquisition of Mint Mobile has finally received regulatory approval from the U.S. Federal Communications Commission (FCC). T-Mobile will pay up to $1.35 billion for the low-cost wireless service provider made famous by actor Ryan Reynolds. 

“The FCC cited T-Mobile’s voluntary agreement to implement a 60-day unlocking period for all Mint Mobile and Ultra Mobile devices activated on the T-Mobile network before and after the closing,” Reuters reported on April 25. 

This move provides any Mint Mobile and Ultra Mobile subscribers with an out from T-Mobile. Due to this agreement, the deal is expected to close on May 1. 

In Q1 2024, T-Mobile added 532,000 net postpaid phone subscribers, 183,000 more than AT&T’s (NYSE:T) and Verizon’s (NYSE:VZ) loss of 68,000. At the midpoint of its guidance, it expects to add 5.4 million net postpaid subscribers in 2024, up from its previous outlook for 5.25 million. 

The excellent news about T-Mobile’s concession is that it avoids moving to a more industrywide unlocking policy that exists in other countries, such as Canada and the UK. 

I’ve always felt T-Mobile ran the best business of the three top wireless carriers. The FCC approval demonstrates this. 

Smart buy from the “uncarrier.”

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.

Articles You May Like

Tesla Stock Analysis: Can TSLA Rebound Against All Odds?
The Dividend Survival Kit: 7 Stocks Under $50 to Buy for Lifelong Income
Stock Market Crash Warning: Don’t Get Caught Holding These 3 Transportation Stocks
Citigroup Stock Forecast: Cloudy With a Chance of Windfalls
Tesla Stock Warning: Why Now Is Not the Time to Go All-In on TSLA