Microsoft Closed Its Activision Deal. It’s a Win for These Stocks.
Microsoft’s recent acquisition of Activision Blizzard for a staggering $69 billion has sent shockwaves through the gaming industry, leaving investors eagerly eyeing other potential winners in the market. With Activision now off the board, the scarcity of large pure-play video game publishers has created a golden opportunity for companies like Take-Two Interactive Software and Electronic Arts to shine.
The sheer size of Microsoft’s deal with Activision has not only made it the largest tech deal in history but has also served as a barometer for the global regulatory environment. Microsoft had to navigate a complex path, making concessions on streaming rights to secure the deal’s closure. However, the successful completion of this landmark acquisition could embolden other tech giants to seek a stronger foothold in the gaming industry.
According to research firm Newzoo, the global games market is expected to generate a staggering $187.7 billion in revenue in 2023. Analysts have long pointed to the Activision deal as a catalyst for boosting the overall value of video game stocks. With fewer options available for public equity investors to bet on the industry, the potential for further acquisitions or expectations of such deals could drive valuations even higher.
One exciting prospect for gamers is the possibility of Microsoft integrating Activision games into its Xbox Game Pass subscription service. This move could not only provide gamers with cost savings but also redirect their spending towards other games, benefiting companies like Take-Two and Electronic Arts. Take-Two, known for its popular franchises like Grand Theft Auto, Red Dead Redemption, and NBA 2K, and Electronic Arts, with titles such as Madden NFL, EA Sports FC, The Sims, and Battlefield, would be prime targets for big tech suitors.
While Microsoft’s acquisition of Activision has caused ripples in the industry, European game publishers are also attracting attention. Ubisoft, the publisher behind the Assassin’s Creed and Rainbow Six franchises, and CD Projekt, known for The Witcher and Cyberpunk 2077 games, could potentially garner interest for mergers and acquisitions.
Even Nintendo, although unlikely to sell itself, stands to benefit from Microsoft’s commitment to bringing Call of Duty games to Nintendo platforms. Additionally, if valuations across the industry rise, Nintendo’s stock could experience a positive impact.
Raymond James analyst Andrew Marok believes that Take-Two, in particular, will carry a premium due to ongoing interest from big tech and big media companies in gaming deals. This sentiment has led him to raise Take-Two’s rating to Outperform from Market Perform, signaling a positive outlook for the company.
In the wake of these developments, Take-Two’s shares remained steady in Friday’s trading, while Electronic Arts experienced a minor dip of 0.8%. Ubisoft, on the other hand, saw a modest increase of 0.4%, and CD Projekt’s shares closed 0.3% higher in Poland.
The gaming industry is entering an exciting phase, with Microsoft’s acquisition of Activision acting as a catalyst for potential mergers and acquisitions. As the global games market continues to thrive, companies like Take-Two, Electronic Arts, Ubisoft, and CD Projekt are poised to benefit from increased investor interest and potential partnerships with big tech players. The future of gaming looks brighter than ever, promising thrilling experiences for gamers worldwide.