With markets in correction territory amid rising inflation concerns and ongoing geopolitical tensions, investors are looking for opportunities. Some of the best opportunities might be hiding in beaten-down acquisition targets, according to Gene Munster of Loup Ventures.
"An underappreciated part of tech investing here is going to be M&A over the next year," Munster said Wednesday on Benzinga's "PreMarket Prep."
Numerous legitimate companies have been "obliterated" over the last nine months, he said. Some examples would be Toast Inc (NYSE: TOST), Affirm Holdings Inc (NASDAQ: AFRM), Peloton (NASDAQ:PTON) Interactive Inc (NASDAQ: PTON) and Redfin Corp (NASDAQ: RDFN), he said.
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Munster told Benzinga that although he isn't invested in any of the aforementioned names, he is investing in companies that "fit that profile."
Munster's Thesis: Individuals working on M&A at large tech companies are evaluating the potential impacts from government developments, he said.
"It seems that the environment, I think, is subtly shifting more towards a favorable relationship with [Washington, D.C.], given all the things that are going on in [geopolitics]."
Separately, he said the individuals responsible for M&A efforts have seen a lot of these stocks rocket higher over the last two years.
"You are looking around and seeing who is available and you're gettin' to work. I think you're going to see some M&A and I think you could do a basket of some of these companies that are, again, real companies."
Let's Zoom: Munster noted that he's looking for companies that he thinks are being mismodeled by the Street in terms of long-term growth.
Zoom Video Communications Inc (NASDAQ: ZM) is one of those companies, he said.
The stock is up a lot from pre-pandemic levels, but down significantly from its peak, Munster said, adding that the Street is pricing in 5% to 7% earnings growth over the next few years.
"Some people can say that's aggressive because we are going to be shifting back to 2019 world and we're not going to be doing Zoom as much. Some people, including Loup, believe that that's conservative, that Zoom is now a verb and there are some things that are going to be ... with us for a long time."
ZM Price Action: Zoom has traded between $105.01 and $406.48 over a 52-week period.
The stock was down 0.15% at $108.33 Wednesday afternoon.
Photo: courtesy of Zoom.
See the full interview here:
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