What companies do you think could get acquired in 2022? In this segment of Backstage Pass, recorded on Jan. 19, Fool.com contributors Rachel Warren, Jose Najarro, Trevor Jennewine, and Danny Vena respond to a member's question and discuss some companies they think could be ripe for acquisition in the coming year.
Rachel Warren: ProShopGuy was saying, Robinhood (HOOD +4.55%) has an attractive demographic of customers. Its market cap has dropped from $50 billion to under $12 billion. Could this be an attractive takeover target for a big brokerage company? I don't know. It's an interesting thought. Do any of you guys have thoughts on this or follow the stock very closely?
Jose Najarro: I don't, but one I would think that would be pretty cool to enter that market, in my opinion, will be PayPal (PYPL +2.01%). Maybe not a big trading. I mean, Square [Block (SQ +3.77%) 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 (SOFI +2.05%) 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 (ROKU +3.86%). Do you think it would be possible or realistic for a company like Netflix (NFLX 9.71%) 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 to be a takeout target just because of the sheer magnitude, the size of the company. But that said, Roku was actually a spin-off from Netflix back in the early days.
This was a project that Reed Hastings and Anthony Wood, the respective CEOs of Netflix and Roku put together, and they were deciding on whether or not to release its own set-top box. But at the time, they were afraid of alienating all of the other TV and DVD Blu-ray manufacturers who were putting that ubiquitous Netflix button on their remotes so they spun it out 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 check, I think Roku's market cap was at 30 some billion. Actually, $22 billion. Yeah, a lot more digestible than it was even just a few months ago. It's down 55%. So possible, but that would certainly be ambitious.
Trevor Jennewine: It would. It just popped into my head. But the more I think about it, Netflix has said that they're not going to go into the ad-supported streaming service. But if they had something like Roku that already has that ad-supported streaming, I mean, Netflix could use it.
It's producing a lot of content. I feel like you could put some of its content onto the Roku channel. It seems like there's some synergies there. Definitely ambitious though. Either of you guys have thoughts on that?
Jose Najarro: I would just say the thing there that would scare me all would be regulators.
Rachel Warren: Right.
Jose Najarro: I mean, we'd say you're holding the streaming platform, but you're also being owned by one of the streaming full-year itself.
Rachel Warren: Yeah, I have to wonder if that would go through. I think it's interesting this idea though with Robinhood that ProShopGuy brought up. I mean, I could definitely see like Jose was saying, maybe Square or PayPal. I mean, this fits within this ecosystem that they're building.
Who knows? I would find that fascinating. In terms of a company, I think that could be a potential acquisition target.
I don't know, this is a company we're going to talk about in a little bit. But Peloton (PTON +1.39%), maybe. Who knows? I mean, this is a company that's been having a tough time for a lot of different reasons.
More people are going to work out in-person even as we're in a different phase of the pandemic. I think people might be reducing some of their discretionary expenses, 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 been dealing with some serious supply chain headwinds that are causing them to raise their prices like a lot of companies with physical products.
They're going through a tough time, doesn't mean they won't come out the other side of it. But I could see some companies potentially eying them as an acquisition target.
