- Boston Beer (SAM): The malt beverages producer saw its sales by distributors to retailers decline by 7% due to decreasing hard seltzer demand.
- Peloton Interactive (PTON): The fitness company increased subscription fees to move the company closer to reaching breakeven on the bottom line.
- SoFi (SOFI): The personal finance company expects to grow Q1 adjusted net revenue by 30% to 32% over the past year.
2021 was a memorable year for merger and acquisition (M&A) activity, which soared 64% year-over-year (YOY) to reach $5.9 trillion. As a result, Wall Street is debating which stocks may be at the center of potential M&A deals in the coming quarters.
The surge in the number of transactions last year was led by transactions in the tech space. In addition, private equity investors and special-purpose acquisition companies (SPACs) also helped fuel the growth.
According to research by KPMG, the U.S. market was particularly robust in 2021, participating $2.9 trillion in transactions, up 55% from 2020. As a result, the U.S. accounted for nearly 60% of all global deals by value. Wall Street expects the momentum for M&A deals to continue in the rest of 2022 as well.
A recent survey by Deloitte suggests that companies are focused on achieving transformational change via M&A. The pandemic showed organizations the growing need for digital transformation, automation, process simplification, as well as agility. Technology, healthcare and advanced manufacturing are forecast to be the three leading sectors in upcoming transactions.
With that information, here are three potential M&A deals that could become significant stock movers in 2022.
| SAM | The Boston Beer Company, Inc. | $375.00 |
| PTON | Peloton Interactive, Inc. | $18.08 |
| SOFI | SoFi Technologies, Inc. | $6.38 |
Potential M&A Deals: Boston Beer Company (SAM)
Our first potential M&A deal candidate is Boston Beer (NYSE:SAM), a leading producer of high-end malt beverages with strong market positions in craft beer, hard cider and hard seltzer. Its brands include Samuel Adams, Angry Orchard, Twisted Tea and Truly Hard Seltzer.
Boston Beer released first-quarter 2022 results on April 21. Net revenue decreased 21% YOY to $430 million. The first-quarter net loss came in at 16 cents per diluted share, down from a net income of $5.26 per diluted share a year ago. Cash and equivalents ended the period at $15.8 million.
Over the past year, consumer demand has shifted away from Truly Hard Seltzer, forcing the company to reduce its outlook multiple times. As a result, the company’s beer shipments declined 25% YOY to 1.7 million barrels during the quarter.
SAM stock has dropped 70% over the past year to hit a multi-year low. Shares are trading at 22.4 times forward earnings and 2.1 times current sales. Meanwhile, the 12-month median price forecast for Boston Beer Company stands at $388.50.
Peloton Interactive (PTON)
Next up is Peloton Interactive (NASDAQ:PTON), which offers upscale fitness equipment as well as an interactive fitness platform. During the pandemic, the company was in the limelight while it streamed instructor-led boutique classes to members in the comfort of their homes.
Peloton announced Q2 FY22 results on Feb. 8. Revenue grew 6% YOY to $1.1 billion. Net loss per diluted share was $1.39, compared to earnings per diluted share of 18 cents in the prior-year quarter. Cash and equivalents ended the period at $1.6 billion.
Despite sluggish top line growth, connected fitness subscriptions surged 66% YOY. Peloton is growing its subscriber base, yet at a slower pace than in previous years. As a result, management has increased its higher-margin subscription fees while reducing the price of its equipment.
However, the company is forecasting a 23% drop in revenue in the third quarter. Wall Street has not been kind to PTON stock, which is trading near a record low. It is down 82% over the past year.
As a result, shares are trading at just 1.5 times trailing sales. At present, the 12-month median price forecast for Peloton is at $42.
Potential M&A Deals: SoFi Technologies (SOFI)
Our final M&A deal candidate is SoFi (NASDAQ:SOFI), the financial technology (fintech) name. It offers personal and student loans, mortgages and banking services via its mobile app and website. In January, the company gained approval for a banking charter and started SoFi Bank operations.
Management reported Q4 results on March 1. Revenue increased 67% YOY to $286 million. Net loss per share fell to 15 cents, down from a $1.85 loss per share in the prior-year quarter. However, adjusting for non-cash expenses, i.e., stock-based compensation expenses, the company is more than breaking even. Cash and equivalents ended the period at $768 million.
The fintech group signed up 523,000 new members during the quarter, with the total number reaching 3.5 million, up 87% YOY. However, the suspension of federal student loan payments will negatively impact topline growth until September 2022.
Like many growth names, SoFi stock is currently trading at a 52-week low, down 60% year-to-date. Shares look undervalued at just 5.4 times trailing sales. Finally, the 12-month median price forecast for SoFi stands at $13.
On the date of publication, Tezcan Gecgil 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.com Publishing Guidelines.
