Pacific Crest Downgrades LinkedIn, Says Criteo A Likely Takeout Target

Pacific Crest has downgraded LinkedIn Corp LNKD to Sector Weight following its agreed sale to Microsoft Corporation MSFT. Furthermore, the note said Criteo SA (ADR) CRTO could be a takeover target.

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Despite saying a the acquisition is "part of the software M&A wave" and "not necessarily a start to an Internet wave," the brokerage said, "We believe the most likely acquisition would be Criteo, which has a wide number of potential acquirers and a differentiated data set."

Based in Paris, France, Criteo offers recommendation algorithms that create and tailor ads to specific user interest by determining the specific products and services to include in the advertisement. It also provides prediction algorithms that predict the probability and nature of a user's engagement with a given advertisement and bidding engine for executing campaigns based on objectives set by the clients.

Commenting on the M&A in the sector, analyst Evan Wilson said Facebook Inc FB, Alphabet Inc GOOG GOOGL and Yahoo! Inc. YHOO are busy with other things such as messaging, A.I., bots and cloud.

"We think the most discussed targets in the Internet on our coverage list, Twitter Inc TWTR, Yelp Inc YELP and Zillow Group, Inc.-Class A ZG, are likely to be around by the end of this year," Wilson wrote in a note.

Meanwhile, Wilson termed the Microsoft deal as "a very logical exit for LinkedIn shareholders."

Microsoft is buying LinkedIn for $196 a share, or $26.2 billion. It's paying a 49.5 percent premium to Friday's close of $131.08, although a discount to where LinkedIn traded last year.

Related Link: Deutsche Bank Calls $26 Billion Price Tag For LinkedIn "Reasonable"

"We think the timing is right for LinkedIn after a difficult last year-and-a-half of execution. Ramping its new businesses could leverage Microsoft's strengths, in our view," Wilson noted.

Being part of Microsoft, the analyst said LinkedIn would "more aggressively pursue new opportunities to monetize its data, while its core business slows."

At the time of writing, shares of LinkedIn were down 0.31 percent to $191.62, while Criteo was up 0.86 percent to $43.39.