InvenSense Inc (NYSE:INVN) shares took flight today, accelerating 18% after news broke that the company is to be acquired by TKD Corporation for $13 per share in an all-cash transaction circling $1.3 billion in value. The deal is anticipated to close by the September quarter of 2017, assuming all proceeds successfully.
In reaction, top analyst Matt Ramsay at Canaccord reiterates a Hold rating on INVN while boosting the price target almost twice over from $7 to $13, which implies a just under 2% upside from where the shares last closed.
Though the news does not come as a total shock to the analyst, considering the M&A deal has lately been keeping the press abuzz, he opines, “We believe the sale of the business is a good medium-term outcome for InvenSense shareholders given the current business concentration at Apple and the longer timeline to diversify the business meaningfully into non-mobile markets. Therefore, we believe the acquisition gives InvenSense more time and flexibility to diversify its business into new opportunities including automotive, drones, wearables and other IoT applications.”
However, “As a standalone company apart from the acquisition, while we anticipate InvenSense gradually achieving revenue diversification, near-term weakness and customer concentration remain a concern. Further, while we believe the InvenSense motion-sensing hardware/software portfolio remains differentiated for motion, navigation and imaging applications, we fear margin-pressured smartphone OEMs could remain hesitant to pay up for InvenSense products medium term,” Ramsay concludes, optimistic on back of the board-approved agreement for the merger, but sidelined overall on INVN’s prospects.
As usual, we like to include the analyst’s track record when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks, top five-star analyst Matt Ramsay has achieved a high ranking of #51 out of 4,291 analysts. Ramsay upholds a 65% success rate and realizes 18.9% in his yearly returns. However, when recommending INVN, Ramsay loses 46.8% in average profits on the stock.
TipRanks analytics indicate INVN as a Buy. Based on 5 analysts polled by TipRanks in the last 3 months, 2 rate a Buy on InvenSense stock while 3 remain sidelined. The 12-month average price target stands at $10.50, marking a close to 18% downside from where the stock is currently trading.