Shares of Kellanova(NYSE: K) -- a collection of snack and food brands spun off from Kellogg less than a year ago -- are soaring on Monday even though it's a terrible day for stocks, generally speaking. The S&P 500 was down almost 4% as of 11 a.m. ET, which is an enormous single-day move for this large index. But Kellanova stock was up almost 14% because it could be an acquisition target.
Kellanova is suddenly attracting attention
According to Reuters, privately held Mars is interested in buying Kellanova. Mars is best known for its candy brands, including Snickers, Twix, M&M's, Skittles, and more. But its business isn't limited to candy; it has pet brands and food brands as well. Apparently, it believes Kellanova's brands such as Pringles and Cheez-It could be valuable additions to its portfolio.
Kellanova and Mars haven't made official statements yet. But rumor has it that Mars isn't the only interested party. David Faber, co-anchor of Squawk on the Street on CNBC, reported rumors that Hershey, Mondelez, and PepsiCo are also sizing up Kellanova.
To be sure, Kellanova's portfolio includes some of the best-known brands in the world, so the attraction isn't surprising. But potential buyers would likely have to pay a premium, which is why the stock is up today on the rumors.
Is Kellanova a bargain?
With today's jump in price, Kellanova now trades at almost 27 times earnings, which may be pushing what it would be worth in an acquisition. Consider that the business is low growth. And while it is successfully working to gain operating leverage, that's still a high price for a low-growth business.
Kellanova is a solid business, and I could see a deal eventually coming to fruition. But investors should keep in mind that acquisition rumors are just that: rumors. If a deal fails to materialize, the stock could easily go back to where it was previously.
If I were a Kellanova shareholder, I would keep holding -- nothing has changed with the business. But as someone on the sidelines, I won't be buying shares hoping an acquisition sends them higher still. That could be a risky, speculative game to play.
Should you invest $1,000 in Kellanova right now?
Before you buy stock in Kellanova, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Kellanova wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $657,306!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. TheStock Advisorservice has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of July 29, 2024
Jon Quast has no position in any of the stocks mentioned. The Motley Fool recommends Hershey, Kellanova, and WK Kellogg. The Motley Fool has a disclosure policy.
