The video game industry saw an increase in consolidation in 2022 as some large companies took the opportunity to add game studios to their roster of operations. microsoft (MSFT 3.92%) began the year by announcing plans to acquire the house from Obligations, Activision Blizzard (ATVI -0.51%), for a historic figure of 68,700 million dollars. Meanwhile, sony bought four studios during the year, the largest of which is Bungie for $ 3.7 billion.
As Microsoft and Sony confronted each other to see who would be crowned king of consoles, Interactive Take-Two (TTWO 0.06%) made a promising acquisition to expand their business and diversify profits. In May, the company bought mobile gaming titan Zynga for $ 12.7 billion.
Take-Two and Activision Blizzard are facing some short-term problems as a company and that has made their shares somewhat attractive to long-term investors. Investors looking to add a gambling stock to their portfolio would do well to look at one of these industry-leading companies. But what is the best purchase? Let’s find out.
Take-Two Interactive: an excellent long-term perspective
Shares of Take-Two have fallen 34% so far this year, due to the impact of slowing consumer demand for video games and an expensive acquisition that led to a disappointing quarterly report. In the company’s first-quarter fiscal 2023 report (for the quarter ended June 30), earnings missed analysts’ estimates, causing its shares to fall 6% on August 8. Wall Street estimates $ 1.73 billion. Meanwhile, its 2023 reserve guide of $ 5.8 billion to $ 5.9 billion missed expectations by $ 6.4 billion.
Despite a bearish forecast stemming from “macroeconomic and geopolitical factors”, the company remains a solid buy for investors willing to hold it for the long term. Take-Two’s rich content library and its share of growing markets make it a business with great potential.
Take-Two Interactive has made a name for itself in the industry with two of its largest game publishers: Rockstar Games and 2K. These studies have released mega-hits like Grand Theft Auto (GTA), Red Dead Redemptiony NBA 2K. Also, the title of 2013 gta V It has permeated the gaming community like few games before. After becoming the fastest entertainment product earning a billion dollars, gta V became the most successful financial media title of all time reaching $ 6 billion in total revenue in 2018. The Take-Two game continues to earn $ 911 million annually through new content and microtransactions, which created great anticipation for the franchise from investors. next installment, which is expected to be released in the next two years.
In addition to promising game releases on the way, Take-Two’s recent acquisition of Zynga saw it enter the lucrative mobile gaming market. Analysts expect the market to rise from $ 149.5 billion in 2022 to $ 173.4 billion in 2026, which bodes well for Take-Two’s future earnings. With a significant drop in the share price in 2022, the game maker’s shares are a bargain for investors willing to hold on to them for the long term.
Activision Blizzard: A Short Term Profit Chance
Activision Blizzard grabbed media headlines this year thanks to Microsoft’s takeover bid. Although the news was announced in January, the purchase is still subject to a lengthy review process by regulators around the world. It’s one of the most expensive acquisitions in the industry, but it’s also one of the most reviewed deals of the year due to antitrust concerns. Microsoft also owns one of the most popular game consoles and a few game studios.
Microsoft has made several statements in recent months, reassuring investors that progress is being made on the deal and saying it is optimistic that the deal will close in June 2023.
Activision Blizzard’s stock price is around $ 72 as of October 17, and Microsoft has agreed to buy the company for $ 95 per share. As a result, pending regulatory approval, an investment in Activision could return around 32% at this time.
Warren Buffett, chief executive officer Berkshire Hathaway (BRK.A 1.54%) (BRK.B 1.59%) appears to have confidence in the merger taking place. The conglomerate held 68 million Activision shares at the end of the second quarter of 2022. However, investors should plan to hold the game maker’s shares long-term in case the deal doesn’t get approval.
Activision Blizzard’s most valuable asset is the Obligations franchise, with an annual expenditure of its users representing about 1% of the entire video game market. The series is immensely popular, but has seen a decline in interest over the past year. In fact, the decline in player engagement was the main reason Activision’s revenue fell by 25% in the first half of 2022. The next game in the Activision series Call of Duty: Modern Warfare II It will be released on October 28 and the anticipation of its arrival could explain some of the decreases. It could also generate more revenue in the coming quarters.
The company also has a large library of other games, such as world of war y Supervisionbut Obligations It is definitely their bread and butter. Activision shares are likely to drop further if the deal with Microsoft doesn’t close, but its strong presence in the industry still makes it an attractive long-term buy.
What’s the best buy?
If the choice comes down to buying Take-Two or Activision Blizzard stock, the safest option right now is Take-Two. Take-Two does not have such an uncertain immediate future and is more likely to generate significant returns for patient investors.
Dani Cook has no position in any of the titles mentioned. The Motley Fool has positions and recommends Activision Blizzard, Berkshire Hathaway (B shares), Microsoft and Take-Two Interactive. The Motley Fool recommends the following options: January 2023 $ 115 long call on Take-Two Interactive, January 2023 $ 200 long call on Berkshire Hathaway (B shares), January 2023 $ 200 short Berkshire Hathaway (B shares) and short January 2023 $ 265 call Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.
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