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Snapping up a few shares of Xilinx stock looks like a pretty good idea right now.
That's because Xilinx Inc. (Nasdaq: XLNX) has moved to the top of the list of possible acquisition targets in the semiconductor industry.
And make no mistake, the chipmakers are in the mood for deal-making.
Just yesterday (Thursday) we saw the $37 billion acquisition of Broadcom Corp. (Nasdaq: BRCM) by Avago Technologies Ltd. (Nasdaq: AVGO). Back in March, NXP Semiconductors NV (Nasdaq: NXPI) agreed to pay $11.8 billion for Freescale Semiconductor Ltd. (NYSE: FSL).
Deals in the semiconductor industry have already surpassed the $19.5 billion total for all of last year – and that was a three-year high.
"There's absolutely more to come," Gavin Slader, a managing director in the investment-banking group at JMP Securities, told Bloomberg. "I would almost say anyone who hasn't done a deal at this point has either got to be thinking about selling themselves or being acquisitive."
Every fresh M&A deal reminds investors of the potential for profits. Broadcom stock, for example, shot up 21% Wednesday on rumors of the Avago deal.
Now Xilinx is lined up to be one of the standout takeover potentials…
More Deals a Good Omen for XLNX Stock
And even after all the merger activity that's happened, there are still a fair number of targets, including Atmel Corp. (Nasdaq: ATML), Silicon Laboratories (Nasdaq: SLAB), Microchip Technology Inc. (Nasdaq: MCHP), and Maxim Integrated Products Inc. (Nasdaq: MXIM).
But while any of those could be bought, Xilinx has the traits of a front-runner. It's affordable, but big enough to make an impact on the acquiring company. Plus, XLNX has an unusual technology that could give its new owner an edge.
That makes Xilinx stock, which is trading at about $48 right now, a compelling buy. An offer for XLNX should include a premium of between 10% and 25% – a very nice short-term gain.
The Avago offer of $54.50 for Broadcom, for instance, is 15% above the BRCM trading price of about $47 before the rumors erupted.
About the Author
Dave has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.