Global gaming stocks rose after Microsoft Corp. made a landmark $69 billion takeover bid for Activision Blizzard Inc., a move that could be beneficial for the sector after a cranky start to 2022.
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U.S. rivals Electronic Arts Inc. Take-Two Interactive Software, France s Ubisoft Entertainment SA and Poland s CD Projekt SA all rose on Tuesday, with some talked-up as potential acquisition targets. The recent selloff in their shares and the rising interest in gaming and the metaverse from large companies such as Meta Platforms Inc. has raised expectations for more deals in the industry.
Neil Campling, an analyst at Mirabaud Securities, believes that if Microsoft can get them over the line without any antitrust issues, the rest are all in play, and Neil Campling, an analyst at Mirabaud Securities, sees Electronic Arts as the most obvious takeout target. Ubisoft is seen as a potential target, but could be hurt by the family holding structure, according to Campling.
The push for Activision follows Take-Two's recent offer for mobile game maker Zynga Inc. Cowen analyst Doug Creutz writes that the two deals, coming in consecutive weeks, highlight how these companies have a lot more strategic value than was acknowledged by the market. He speculated that Sony might have to look at chasing their own blockbuster acquisition in order to enhance its exclusive portfolio. According to Cowen, Electronic Arts would be the most logical choice.
Jordan Klein, a managing director at Mizuho Securities, wrote that there were only a few key names that remain as possible targets, and that Ubisoft, Take-Two, and Electronic Arts could see valuations expand as potential buyers could look to make a move. He noted attractive valuations for Take-Two and especially Electronics Arts, which has one of the best game title libraries. He named Netflix Inc. Walt Disney Co., Apple Inc., Amazon.com Inc. and Meta Platforms as potential buyers.
Activision shares went up 27% on Tuesday, while Electronic Arts advanced 4.1%, Take-Two rose 1.6% and Playstudios Inc. gained 2.9%. The rallies came out on a day when tech was generally lower due to concerns over bond yields.
Piper Sandler considers Unity Software Inc. to be an indirect beneficiary of Microsoft's move, and he believes that the deal represents the beginning of a metaverse arms race. Shares of Unity fell by 3.4%.
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