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Zacks Analyst Blog Highlights: Microsoft, Activision Blizzard, Tencent and Sony

For immediate release

Chicago, IL – January 19, 2022 – Zacks.com announces the list of stocks featured in the analyst blog. Every day, Zacks Equity Research analysts discuss the latest news and events impacting stocks and financial markets. Stocks recently featured in the blog include: Microsoft MSFT, Activision Blizzard ATVI, Tencent TCEHY and Sony SONY.

Here are the highlights from Tuesday’s analyst blog:

Microsoft set to buy Activision and expand its gaming footprint

MicrosoftThe gambling ambitions of are well known. The company is now making a major push into the video game space with the just-announced acquisition plan. Call of Duty maker ActivisionBlizzard.

Microsoft will pay $95.00 per Activision share, with a total deal value of $68.7 billion, making it the company’s biggest deal ever. After completion of the transaction, Microsoft will become the world’s third-largest gaming company, behind only Tencent and sony.

Microsoft, along with Sony, is one of the largest suppliers of gaming hardware. Its Xbox console has been a direct competitor to Sony’s PlayStation. The Activision acquisition will now add a number of well-known franchises to Microsoft’s games portfolio, including World of Warcraft,Diablo, Monitoring and King Digital’s candy Crush, with the exception of the most popular Call of Duty.

Activision took advantage of the popularity of these franchises. The company reported revenue of $2.07 billion in the third quarter of 2021 (quarter ending September), up 5.9% year-over-year. Net bookings increased 6.4% year over year to $1.88 billion. Digital channel net bookings were $2.34 billion, up 24.5% year-over-year.

More importantly, for the quarter ended September 30, 2021, the total number of monthly active users was 390 million. Without a doubt, Microsoft’s Game Pass wallet will benefit from the addition of this huge user base. Microsoft plans to launch Activision’s games in Game Pass, which has more than 25 million subscribers.

Microsoft will also be able to take advantage of Activision’s mobile franchises, including candy Crush and Call of Duty: Mobile, the latter being developed in collaboration with Tencent.

The acquisition will strengthen Microsoft’s game development expertise, as it will add 30 in-house game development studios. The deal will also help Microsoft expand its footprint in esports. Activision’s Overwatch League can be considered a pioneer of the esports concept.

Activision’s business will fall under the Microsoft Gaming division. Significantly, gaming revenue grew 16% (up 14% cc) in the first quarter of fiscal 2022, driven by increased engagement levels. Xbox hardware revenue jumped 166%, driven by strong demand for new consoles.

For the second quarter of fiscal 2022, games revenue is expected to grow in the mid-single digits year-over-year on strong demand for the next-generation Xbox Series X and S consoles.

Microsoft shares were down 1.6% in premarket trading. Shares of this Zacks Rank No. 2 (buy) company have risen 43.3% over the past year, outpacing the 31.6% growth of the Zacks computer software industry. You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The deal is expected to close in fiscal 2023 and will be accretive to Microsoft’s non-GAAP earnings upon completion. Zacks’ consensus estimate for fiscal 2023 earnings is currently pegged at $10.26 per share, up 0.9% over the past 30 days.

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Past performance is not indicative of future results. The potential for loss is inherent in any investment. This document is provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold any security. No recommendation or advice is given as to whether any investment is suitable for any particular investor. It should not be assumed that investments in the securities, companies, sectors or markets identified and described have been or will be profitable. All information is current as of the date hereof and is subject to change without notice. The views or opinions expressed may not reflect those of the company as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management of securities. These returns come from hypothetical portfolios composed of stocks with Zacks Rank = 1 that have been rebalanced monthly without transaction fees. These are not the returns of actual stock portfolios. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for more information on the performance figures displayed in this press release.

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