Dow futures were subdued on Tuesday, lagging Wall Street peers after the blue-chip index logged a terrific 11-day rally, while investors awaited quarterly earnings from megacap technology companies.
For Immediate ReleaseChicago, IL – July 25, 2023 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the finan
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Asian shares jumped and the yuan rose on Tuesday as investors cheered China's pledge to step up support for its sputtering economy, with the heaviest buying in Hong Kong's beaten-down property sector while the dollar dipped against key rivals.
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Billionaire Elon Musk's decision to rebrand Twitter as X could be complicated legally: companies including Meta and Microsoft already have intellectual property rights to the same letter.
The odds of a successful Microsoft (
NASDAQ:MSFT
) takeover of Activision Blizzard (
NASDAQ:ATVI
) haven't been this high in the year-and-a-half timeframe since the deal was proposed. Indeed, even video game stocks like Electronic Arts (
NASDAQ:EA
) and Take-Two Interactive Software (
NASDAQ:TTWO
) could have room to run as the biggest deal in gaming inches closer to the finish line.
In any case, Microsoft looks like it has a lot to win from onboarding Activision Blizzard's assets. As such, I am also bullish on MSFT but am keeping a neutral stance on ATVI.
At $92 and change, Activision Blizzard stock only has around 3% to go before it hits the acquisition price of $95 per share. Indeed, it's been a lengthy regulatory battle for Microsoft but one that could end in its favor following the latest judge ruling that denied the FTC's move to halt the Microsoft-Activision tie-up.
Undoubtedly, the deal isn't a certainty, as the deadline to close has been moved to October 18. Still, most of the merger-arbitrage gains have been made, and that's been enough for Warren Buffett’s firm to sell 70% of its stake in ATVI. Indeed, another 2-3% or so doesn't seem worth pursuing, given the regulatory unknowns that still may lie ahead! I believe this is another smart move by Buffett and another mark for the win column over at Berkshire Hathaway (
NYSE:BRK.B
).
Successful Microsoft Deal Could Pave the Way for Gaming Acquisition Rush
It took quite a bit for Microsoft to make it through the regulatory battles. Given the recent judge's ruling, it certainly seems like even a "long-shot" sort of deal is possible as long as the right moves are made to appease regulators and consumers. If the Microsoft-Activision Blizzard deal closes this year, I do think the race is on to consolidate the video gaming industry.
Undoubtedly, there won't be that many pure plays available on the public markets if ATVI goes away. Therefore, remaining publicly-traded companies like EA and TTWO may actually be in for a greater scarcity premium, and perhaps new speculators could look to play a takeover by another big-tech beast.
Undoubtedly, the market overlap between mega-cap players seems to be increasing. They all seem to have some skin in the
AI race, and now, entertainment services seem to be another battleground as we inch closer to the
Metaverse and spatial computing. With that in mind, I would not be shocked if another tech giant with a more than $1 trillion valuation steps up to the plate to gain a big-league game developer.
Video game developers have been hit with tough times. That said, I view the market as one that could be made better in the hands of a cash-rich tech giant with massive financial resources. Such greater financial backing could allow for more ambitious projects that may have been too risky for a standalone firm.
Indeed, Take-Two Interactive is one video game firm that's been profoundly successful with its ambitious, massive open-world games like
Grand Theft Auto and
Red Dead Redemption. With such expertise, the company could be the next best thing for a potential acquirer who seeks to compete against Microsoft in the video-gaming market.
Keeping Consumers Happy Could be the Key to Improving Deal Odds
Microsoft is keeping the beloved Activision-owned FPS (first-person shooter) franchise
Call of Duty on PlayStations for another 10 years. With a binding agreement in place, PlayStation gamers are happy. However, it's Xbox gamers that have the most to win from a greenlighted Activision Blizzard deal.
Undoubtedly, the Xbox Game Pass has been nothing short of transformative for various gamers. As titles from Activision and Blizzard launch on the platform, gamers will get even more bang for their buck, and Microsoft will be able to justify more price increases. Either way, the deal seems to be a win for all parties involved, especially the consumer.
As long as consumers stand to benefit, massive mega deals may still have a reasonable chance to complete despite anti-trust regulators who seem so willing to crack down on big tech. With Activision Blizzard likely to come off the market, I'd look for other mega caps to take a page out of Microsoft's acquisition playbook. Yes, regulatory hurdles are daunting to get through, but Microsoft has shown it is possible despite the non-stop headlines warning that big tech has become too powerful.
Is Microsoft Stock a Buy, According to Analysts?
Turning to Wall Street, MSFT stock comes in as a Strong Buy. Out of 35 analyst ratings, there are 31 Buys, three Holds, and one Sell recommendation. The
average Microsoft stock price target is $371.20, implying upside potential of 8.5%. Analyst price targets range from a low of $232.00 per share to a high of $425.00 per share.
Is Wall Street Bullish on Video Game Stocks?
Looking at the other three stocks mentioned in the article using TipRanks' comparison tool, it looks like analysts are most bullish on TTWO, giving it a Strong Buy rating. Nonetheless, all three stocks below have relatively little upside potential, at least according to analysts' price targets.
The Bottom Line
As Microsoft tries to snap up Activision Blizzard, I expect that other big tech companies will take note as things get serious about gaming.
It's hard to tell if more industry consolidation will be in the cards from here. Regardless, I like gaming plays like EA and TTWO for the long run, as they may very well be the last few targets that can help even the video game playing field.
Disclosure
Fintel reports that on July 24, 2023, Raymond James maintained coverage of Microsoft (NASDAQ:MSFT) with a Outperform recommendation. Analyst Price Forecast Suggests 1.92% Upside
Fintel reports that on July 24, 2023, Goldman Sachs maintained coverage of Microsoft (NASDAQ:MSFT) with a Buy recommendation. Analyst Price Forecast Suggests 1.92% Upside
Major market indices all closed in the green today, with the Nasdaq mostly shrugging off its Nasdaq-100 rebalance for the “Magnificent 7” stocks which together had grown to more than 50% of the sub-index’s valuation. Meanwhile, th
Global equity markets and Treasury yields rose on Monday as investors braced for interest rate decisions from key central banks, including the U.S. Federal Reserve, as well as corporate earnings that may shed light on the state of the economy.
This is a key week for earnings as almost a third of the S&P 500 is expected to report earnings, including many of the tech titans and those now called the “magnificent 7.”
AI fever is here to stay, and without a doubt, today's top-tier tech winners will focus on machine learning as they report their quarterly earnings results. To help you pick the cream of the crop and maximize your portfolio's potential, I'm bringing you
three headline grabbers that are proven leaders in the ongoing AI arms race.
Meta Platforms (
NASDAQ:META)
For a while, Meta Platforms was all about the
Metaverse and virtual reality. While Meta and CEO Mark Zuckerberg are still focused on the Metaverse, the company is loudly and proudly delving into the generative AI revolution this year.
Granted, another well-known technology firm got a head start when it invested heavily in OpenAI's
ChatGPT chatbot (that company is on this list, as well). Don't assume that Zuckerberg is content to just play catch-up, though.
To stay competitive in this realm, Meta has its own ChatGPT rival, known as Llama. The most recent iteration of this product, Llama 2, will reportedly be "free for research and commercial use." Is Zuckerberg making a brilliant move here, or has he completely lost his marbles? Either way, he's preparing to disrupt the generative AI industry just like he did with social media.
Now, all eyes are on Meta Platforms as the company is about to release its second-quarter 2023 earnings data. Analysts expect the company to
report EPS of $2.91, which may be a high bar to clear, but it's feasible, as Meta Platforms delivered a solid EPS beat in Q1.
What is the Price Target for META Stock?
On TipRanks, META is a Strong Buy based on 36 Buys and three Hold ratings given by analysts in the past three months. The average
Meta Platforms stock price target is $324.34, implying 11.2% upside potential.
Alphabet (
NASDAQ:GOOG)(
NASDAQ:GOOGL)
Google parent Alphabet has its own answer to ChatGPT. Admittedly, Alphabet's rival chatbot, Bard, didn't get off to a great start earlier this year. Yet, Bard was only the first chapter in a much longer and possibly more successful story for Alphabet in the generative AI space.
Reportedly, Google is bringing back its co-founder,
Sergey Brin, to help develop
Google’s new AI project, known as Gemini. A general-purpose AI model, Gemini will compete with OpenAI's recently launched GPT-4 model.
Furthermore, Deutsche Bank (
NYSE:DB
) analyst
Benjamin Black, CFA, seems to suggest that Google is well-positioned to compete against OpenAI's chatbot technology as the company competes for valuable advertising revenue. In the end, Bard's fumble might just be a distant memory as Google and Alphabet strive to make headway in the generative AI domain.
If you're prepared to try out an earnings play with Alphabet stock, you can do this either with GOOG or GOOGL shares. As for the company itself, analysts are calling for Alphabet to
report EPS of $1.34 in Q2 2023, which will likely be achievable after Alphabet's first-quarter EPS beat.
What is the Price Target for GOOGL Stock?
According to TipRanks’ analyst rating consensus, GOOGL stock is a Strong Buy based on 26 Buys and five Hold ratings. The average
Alphabet stock price target is $137, implying 12.7% upside potential.
Microsoft (
NASDAQ:MSFT)
Finally, I can't ignore the tech juggernaut that made the smart move of investing billions of dollars in OpenAI earlier this year. Of course, I'm referring to Microsoft, which has already incorporated OpenAI's technology into its Bing, Edge, Azure, and other products.
Surely, Piper Sandler analyst Brent Bracelin had this in mind when he recently called Microsoft an "
AI All-Star." Bracelin seemed particularly impressed with the "robust spending intentions" that businesses have shown lately in regard to the AI-enhanced Azure and Microsoft 365 products.
All in all, Bracelin is confident that Microsoft is "well positioned to capitalize on" recent trends in generative AI. This is a long-term conviction, however, so don't assume that Microsoft's latest advancements in generative AI will be fully reflected in the company's second-quarter earnings.
Still, AI should play a role in Microsoft's Q2-2023 results. Thus, you'll definitely want to keep a lookout for the company's upcoming earnings release. After three consecutive beats, analysts are now prepared for Microsoft to
report EPS of $2.55.
What is the Price Target for MSFT Stock?
MSFT stock is a Strong Buy on TipRanks based on 31 Buys, three Holds, and one Sell rating assigned by analysts in the past three months. The
average Microsoft stock price target is $374.59, implying 8.54% upside potential.
Conclusion: Should You Consider These AI Stocks?
Clearly, Wall Street is enamored with generative AI leaders like Meta Platforms, Alphabet, and Microsoft. These are rock-solid tech firms that have grown their market caps along with their statures as AI-industry innovators.
Now, the ball is in your court. If you're ready, feel free to consider a pre or post-earnings position in META, GOOG/GOOGL, and/or MSFT stock for prime AI exposure and, hopefully, powerful earnings-season price action.
Disclosure
The Dow Jones Industrial Average led Wall Street higher on Monday and notched its longest winning streak in six years as investors bet on sectors beyond technology in a week filled with earnings reports and a Federal Reserve meeting.
The stock market rally this year has been driven mainly by the "Magnificent Seven" stocks. Nvidia NVDA has more than tripled, while Meta META and Tesla TSLA have more than doubled year-to-date. The tech-heavy Nasdaq 100 index has
The Dow Jones Industrial Average climbed on Monday and notched its longest winning streak in six years as investors bet on sectors beyond technology in a week filled with earnings reports and a Federal Reserve meeting.
Cloud computing has become a major focus in the market over the last several years, with the technology allowing companies and consumers to achieve digital feats that otherwise felt impossible.
Two stocks receiving a considerable amount of attention leading up to their second-quarter earnings reports last week were Activision Blizzard (ATVI) and Carvana (CVNA).