Acquisition talk is in the air. Goldman thinks it knows who may be next

Published Sun, Jan 23 20227:16 PM ESTUpdated Thu, Jan 27 20227:38 PM EST

As the dust settles on Microsoft's record-breaking offer for Activision , Goldman Sachs has several under-the-radar stocks it says could be ripe for acquisition. The proposed acquisition of video game giant Activision Blizzard by Microsoft in an eyewatering $68.7 billion all-cash deal sent shockwaves through the tech sector and drove Activision's stock price up nearly 30% on the same day. While a deal of this size may be uncommon, investors seeking to cash in on the next acquisition target could look to Goldman Sachs for some stock ideas. An examination of the bank's M & A screen reveals 31 buy-rated stocks which the bank has given an M & A score of 1. This implies a "high probability," or a 30%-50% chance, of becoming an acquisition target, according to Goldman. Here are four of the companies: Stillfront One company Goldman thinks may be acquired is Swedish online games platform Stillfront , which the bank sees as a "digital enabler" in the mobile gaming sphere. The company has recently announced the acquisition of leading Japanese free-to-play games publisher Six Waves — a deal which Goldman analyst Alexander Duval said will strengthen Stillfront's footprint in East Asia and Japan. The bank has a price target of 117 Swedish krona ($12.80) on the stock, representing a potential upside of 130% to the stock's closing price of around 51 Swedish krona on Jan. 20. Alnylam Pharmaceuticals Goldman also likes Alnylam Pharmaceuticals , which it upgraded to "buy" on Nov. 22, citing "multiple" growth drivers for the company into 2022. The bank highlighted Alnylam's successful product development strategy, with 60% of the company's assets progressing to phase 3 clinical trials compared to the industry average of 10%. The bank also noted the company's M & A potential given interest from large-cap pharmaceuticals in its products. Goldman has ascribed a price target of $273 on the stock. Shares in the company closed at around $138 on Jan.20, implying a potential upside of 97%. Splunk The bank also likes U.S. cloud and analytics software company Splunk as an "underappreciated cloud transition story" and is bullish on the company's long-term fundamentals, analyst Kash Rangan said on Jan. 3. Rangan said the company is at a unique inflection point, with multiple years of durable top-line and free cash flow growth ahead, and a huge opportunity in the rapidly growing cloud business. "If investors look at the [long term], we believe there is considerable appreciation ahead," he added. The bank has ascribed a price target of $205 on the stock, which closed at $118 on Jan. 20 — an implied potential upside of 74%. Covestro German chemicals maker Covestro also screens as an "attractive" M & A target, analyst Georgina Fraser said in a note on Oct. 27. The company is a "well-invested, cost-leading and cash generating commodity asset with structural demand growth and highly consolidated supply-side dynamics," she added. Fraser noted recent "dynamic" M & A activity within the sector, with consolidation activity offering "considerable" growth and costs savings. Goldman Sachs has a price target of 89 euros ($101) on the stock, which closed at 53 euros on Jan. 20, representing a potential upside of 68%.

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As the dust settles on Microsoft's record-breaking offer for Activision, Goldman Sachs has several under-the-radar stocks it says could be ripe for acquisition.