Tech Clearance: Top 3 Acquisition Targets

November 3, 2022 — by Per Christensson

With so many tech stocks on the clearance rack right now, it's the perfect time for large, profitable companies to go bargain hunting. Below are some acquisitions I think would make sense.

1. Apple should buy Spotify
2. Google should buy Fastly
3. Meta should buy Nextdoor

I'm not a professional stock analyst, but I have been in the IT industry for over 20 years and have been investing for over 25. Based on this knowledge, I think these three acquisitions could benefit all the companies involved.

1. Apple should buy Spotify

- AAPL market cap: $2.21 trillion
- SPOT market cap: $13.85 billion

Apple and Spotify have a longstanding relationship — and it's not a good one. Just yesterday, Spotify CEO Daniel Ek said Apple is "doing serious harm" with its anti-competitive behavior. Apple allows the Spotify apps to run on iOS and macOS, but they take 30% of in-app purchase revenue from Spotify. Apple's restrictions make it nearly impossible for Spotify to profit from selling things like audiobooks within the app.

In my opinion, Spotify's service is significantly better than Apple Music. If Apple bought Spotify, it could improve its own music streaming service and gain nearly 200 million new subscribers. With a market cap 160x larger than SPOT, it seems like a no-brainer — if Apple can avoid anti-trust limitations and if Spotify is willing to sell.

2. Google should buy Fastly

- GOOGL market cap: $1.08 trillion
- FSLY market cap: $1.07 billion

Google uses its own content delivery network (CDN) as well as other providers to distribute content globally. Fastly has built an extremely fast, modern CDN designed for developers. I think this service would improve Google's own network, and the company could offer the service to others, allowing it to compete with Amazon's AWS.

FSLY (my stock pick of 2020) had a huge run-up two years ago but has since cratered to the single digits. With a market cap of 1/1000 of Google's, Fastly would be a cheap takeover target with a substantial long-term benefit.

3. Meta should buy Nextdoor

- META market cap: $235 billion
- KIND market cap: $927 million

Meta (formerly Facebook) has had a disaster of a year. The stock is down almost 75% since Jan 1, 2022 — an unfathomable drop for a company with nearly a $1 trillion market cap one year ago. Mark Zuckerberg's bet on the metaverse hasn't paid off, and it looks like it will be several years before — and if — it does.

Alternatively, the company could make a real-world investment in Nextdoor. KIND's total market cap has dropped under $1 billion — less than 1/500 of the decrease in META's market capitalization this past year. By purchasing Nextdoor, Meta could reinvigorate Facebook with new locally-focused features and quickly grow its user base.

Those are my top three acquisition ideas for November 2022. Notably, they are just ideas. I don't have insider knowledge of any of the six companies listed above, so there may be reasons why the acquisitions should not take place. But I am highly familiar with all the companies I listed, and at least on a surface level, I think the investments make a lot of sense.