We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Acquisition Watch: Time to Buy Microsoft (MSFT) or Activision Blizzard (ATVI) Stock?
Read MoreHide Full Article
In a turn of events, the United Kingdom’s Competition and Markets Authority (CMA) now views Microsoft’s (MSFT - Free Report) restructured deal to acquire game developer Activision Blizzard as a positive for the nation's merger and acquisition sector (M&A).
This comes after the E.U. and U.S. have already approved the deal with the U.K.’s provisional decision likely to be the final nod. Today’s news of such has Activision Blizzard’s stock up roughly +2% and near Microsoft’s acquisition offer of $95 a share with the deal valued at $68.7 billion.
As for Microsoft, shares are virtually flat upon the announcement although MSFT’s +33% YTD performance has still topped ATVI’s +23% and the broader indexes.
Image Source: Zacks Investment Research
Restructured Deal
The CMA’s provisional agreement to accept Microsoft’s acquisition of Activision Blizzard is reliant upon the transfer of cloud gaming rights to UbiSoft Entertainment (UBSFY - Free Report) which has seen its stock pop over +4% today.
Ubisoft is a French video game publisher and all of Activision Blizzard’s cloud gaming rights will be shared with the company over the next 15 years so that Microsoft can’t exclusively release the games on its Xbox Cloud.
This includes rights to the iconic Call of Duty brand, in return, Ubisoft will compensate Microsoft for the rights with a one-time payment based on usage.
Growth Potential
With Microsoft addressing the CMA’s monopoly concerns investors can start to gravitate toward the growth conversation of a potential Activision Blizzard takeover.
Taking a look at total sales, we can ponder the prospects. Microsoft’s sales are forecasted to rise 10% in its current fiscal 2024 to $233.80 billion with Activision Blizzard sales expected to jump 13% this year at $9.66 billion.
Theoretically, the nearly $10 billion revenue boost would give Microsoft a 70% growth increase over the last five years with sales at $143.01 billion in its fiscal 2020.
Image Source: Zacks Investment Research
This would easily eclipse Apple’s (AAPL - Free Report) 47% sales growth over the last five years with AAPL having the largest market cap on U.S. stock exchanges just ahead of Microsoft.
Furthermore, it’s likely that Microsoft’s growth will be substantially compounded considering Activision Blizzard has seen a 49% increase in sales since 2019 which also beats Apple’s top-line expansion rate.
Image Source: Zacks Investment Research
EPS Outlook & P/E Valuations
Regarding their bottom lines, Microsoft’s earnings are projected to rise 11% in FY24 and leap another 14% in FY25 to $12.42 per share. Microsoft’s stock trades at 29.3X forward earnings which is above the S&P 500’s 20.2X but mostly on par with the Zacks Computer-Software Industry average and the company is a historical leader in the space.
Image Source: Zacks Investment Research
Pivoting to Activision Blizzard, annual earnings are expected to climb 23% this year and rise another 4% in FY24 at $4.37 per share. Plus, Activision Blizzard’s stock trades at a 21.9X forward earnings multiple which is closer to the benchmark and not a stretched premium to its Zacks Toys-Games-Hobbies Industry average of 17.6X and is a leader in its market as well.
Image Source: Zacks Investment Research
Takeaway
The prospects for a potential Microsoft and Activision Blizzard deal looks promising for both parties at the moment. Microsoft will reap the long-term benefits with its stock landing a Zacks Rank #3 (Hold) and Activision Blizzard’s stock sports a Zacks Rank #2 (Buy) as it edges closer to its acquisition price.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Acquisition Watch: Time to Buy Microsoft (MSFT) or Activision Blizzard (ATVI) Stock?
In a turn of events, the United Kingdom’s Competition and Markets Authority (CMA) now views Microsoft’s (MSFT - Free Report) restructured deal to acquire game developer Activision Blizzard as a positive for the nation's merger and acquisition sector (M&A).
This comes after the E.U. and U.S. have already approved the deal with the U.K.’s provisional decision likely to be the final nod. Today’s news of such has Activision Blizzard’s stock up roughly +2% and near Microsoft’s acquisition offer of $95 a share with the deal valued at $68.7 billion.
As for Microsoft, shares are virtually flat upon the announcement although MSFT’s +33% YTD performance has still topped ATVI’s +23% and the broader indexes.
Image Source: Zacks Investment Research
Restructured Deal
The CMA’s provisional agreement to accept Microsoft’s acquisition of Activision Blizzard is reliant upon the transfer of cloud gaming rights to UbiSoft Entertainment (UBSFY - Free Report) which has seen its stock pop over +4% today.
Ubisoft is a French video game publisher and all of Activision Blizzard’s cloud gaming rights will be shared with the company over the next 15 years so that Microsoft can’t exclusively release the games on its Xbox Cloud.
This includes rights to the iconic Call of Duty brand, in return, Ubisoft will compensate Microsoft for the rights with a one-time payment based on usage.
Growth Potential
With Microsoft addressing the CMA’s monopoly concerns investors can start to gravitate toward the growth conversation of a potential Activision Blizzard takeover.
Taking a look at total sales, we can ponder the prospects. Microsoft’s sales are forecasted to rise 10% in its current fiscal 2024 to $233.80 billion with Activision Blizzard sales expected to jump 13% this year at $9.66 billion.
Theoretically, the nearly $10 billion revenue boost would give Microsoft a 70% growth increase over the last five years with sales at $143.01 billion in its fiscal 2020.
Image Source: Zacks Investment Research
This would easily eclipse Apple’s (AAPL - Free Report) 47% sales growth over the last five years with AAPL having the largest market cap on U.S. stock exchanges just ahead of Microsoft.
Furthermore, it’s likely that Microsoft’s growth will be substantially compounded considering Activision Blizzard has seen a 49% increase in sales since 2019 which also beats Apple’s top-line expansion rate.
Image Source: Zacks Investment Research
EPS Outlook & P/E Valuations
Regarding their bottom lines, Microsoft’s earnings are projected to rise 11% in FY24 and leap another 14% in FY25 to $12.42 per share. Microsoft’s stock trades at 29.3X forward earnings which is above the S&P 500’s 20.2X but mostly on par with the Zacks Computer-Software Industry average and the company is a historical leader in the space.
Image Source: Zacks Investment Research
Pivoting to Activision Blizzard, annual earnings are expected to climb 23% this year and rise another 4% in FY24 at $4.37 per share. Plus, Activision Blizzard’s stock trades at a 21.9X forward earnings multiple which is closer to the benchmark and not a stretched premium to its Zacks Toys-Games-Hobbies Industry average of 17.6X and is a leader in its market as well.
Image Source: Zacks Investment Research
Takeaway
The prospects for a potential Microsoft and Activision Blizzard deal looks promising for both parties at the moment. Microsoft will reap the long-term benefits with its stock landing a Zacks Rank #3 (Hold) and Activision Blizzard’s stock sports a Zacks Rank #2 (Buy) as it edges closer to its acquisition price.