The market continues to love acquisition stories.

Updates on serial acquirors MTSI and UFPT

I began 2024 with a “quick take” piece on shares of MTSI. They had recently completed the acquisition of the RF business from Wolfspeed Inc. (WOLF) and the shares were jumping on hopes that they were able to buy some premium assets on the cheap. I have updated the story for the last couple of quarters showing that all of their year over year growth was coming from that single acquisition, and if you were to look at the company’s base business, revenues were actually shrinking.

Through the beginning of September at least the market looked like it may actually care about the company’s non-growth in its core business, but then between the Federal Reserve cutting rates and the election lights turning on, it was pretty much off to the races for this and many other stocks in the space.

Ditto for the folks over at UFPT. I first voiced some concerns back in April that, excluding growth coming from servicing industry-leader ISRG, the rest of their businesses were actually in contraction mode, and the company was in some danger of showing low-single-digit year over year growth. I put out an update a month or so later pointing out the flattening growth curve for ISRG business and the decline continuing in their other businesses, and the market appeared to take pause at that point.

Before that was allowed to happen, of course, the company rediscovered and renewed their focus on acquisitions. Faster than you can bat your eyes the company announced the purchase of 4 different companies within a 2 month period of time, their faithful analysts all lifted their numbers and price targets higher, and it was off to the races once again.

Both companies recently reported their quarterly numbers, both saw a pretty nice spike in their stock prices on the backs of those reports, and yet I continue to have some concerns regarding the sustainability of their acquisition-fueled results.