By Swissquote Analysts
Microsoft to Buy Activision Blizzard in All-Cash Deal Valued at $75 Billion
Topic of the day
Microsoft Corp. agreed to buy Activision Blizzard Inc. in an all-cash deal valued at about $75 billion, using its largest acquisition by far to grab a videogame heavyweight that has been roiled by claims of workplace misconduct. The deal, if completed, would sharply expand Microsoft’s already sizable videogame operation, adding a stable of popular game franchises including Call of Duty, World of Warcraft and Candy Crush to Microsoft’s Xbox console business and its own games like Minecraft and Doom. Microsoft said the transaction would make it the world’s third-largest gaming company by revenue, behind China’s Tencent Holdings Ltd. and Japan’s Sony Group Corp. The deal is valued at $68.7 billion after adjusting for Activision’s net cash, Microsoft said. Last year, Microsoft made what was then its second largest acquisition, shelling out $16 billion for artificial intelligence company Nuance Communications Inc. to help accelerate growth in the healthcare market. Buying Activision would increase Microsoft’s videogame revenue by about half. Analysts estimate that Activision’s sales in 2021 totaled $8.7 billion, according to FactSet, while Microsoft reported $15.4 billion in gaming revenue for the fiscal year through June, accounting for about 9% of its total. Shares of Activision Blizzard jumped $16.92, or 26%, to $82.31 while Microsoft shares dipped $7.55, or 2.4%, to $302.65. Other game stocks rose, including Electronic Arts, which added $3.47, or 2.7%, to $133.91.
The SMI lost 0.8 percent to 12,530 points on Tuesday. Among the 20 SMI stocks, there were 16 price losers and four price winners. 34.34 (previously: 29.98) million shares were traded. In the run-up to Richemont's midweek outlook and interim report, the luxury goods group's share price fell by 1.3 percent. Swatch lost 0.9 percent after a negative analyst comment. Nestle climbed 0.4 percent, UBS had reiterated the buy recommendation and raised the price target. The building materials group Holcim (-1.7%) strengthened in Belgium with the acquisition of the specialty construction group PTB-Compaktuna. Airport Zurich lost 0.3 percent after a downgrade by Deutsche Bank. Shares of GAM Holding fell 16.7% after the Swiss asset-management firm said it would notch a net loss for 2021 equivalent to around $33 million. High expectations put a dampener of Lindt's "excellent" sales development in 2021, Vontobel analyst Jean-Philippe Bertschy said after the Swiss chocolatier released figures showing higher revenue than in 2019. Double-digit on-year growth in all regions in 2021 is a strong result, though slowdown in North America in the second half is disappointing, Bertschy said. And while the sales growth should be positive for operating leverage and, therefore, earnings, expectations were aggressive, he noted. Vontobel nevertheless keeps a buy rating as Lindt confirmed guidance for 2021's operating margin and this year's sales and margin development. Shares slip 3%.
Tuesday, European stocks were down, with the biggest losses in the technology and travel and leisure sectors. Tech stocks were the biggest fallers as Treasury yields rise following recent comments from Federal Reserve officials that have boosted expectations for imminent monetary policy tightening. The Stoxx Europe 600 index fell 1% to 479.8 points. In Paris, the CAC 40 and SBF 120 were down 0.9%. In Frankfurt, the DAX 40 lost 1% and the FTSE 100 in London fell 0.6%. Oil and gas stocks were buoyed by the rise in crude oil prices. TotalEnergies gained 1.5%, TechnipFMC gained 2.7%. In London, Shell gained 1.6% and BP 0.5%. Automotive manufacturers and suppliers fell back after the announcement of a further drop in new car registrations in the European Union (EU) in December. Plastic Omnium gave up 4.2%, Faurecia lost 2.1% while Renault and Stellantis fell 0.8% and 0.2%, respectively. In Frankfurt, the equipment manufacturer Continental dropped 1.8%. Germany's financial regulator has tightened some requirements on banks operating in the country in light of rising house prices, and this should crimp Deutsche Bank and Commerzbank's excess capital the most, Citi said. Citi estimates the banking sector will take a 7 basis-point hit to core equity tier 1 ratio from the measures, which should reduce excess capital to 6% from 7%. SMCP's board looks more independent and offers a greater range of expertise, Jefferies said after the French fashion group replaced representatives of its former parent with new independent directors. Former Unibail-Rodamco-Westfield boss Christophe Cuvillier becomes chairman of the board, while three new independent directors were appointed last week after shareholders approved a motion jettisoning all representatives of Chinese former majority shareholder Shandong Ruyi and its holding subsidiary European TopSoho. Shares slip 4.3%.
U.S. stock indexes fell Tuesday and bond yields hit two-year highs as investors fretted over whether the Federal Reserve will raise interest rates more quickly and aggressively than expected. Investors, coming off a holiday weekend that had closed markets on Monday, sold stocks and bonds across the board. The S&P 500 slid 85.74 points, or 1.8%, to 4577.11, and the Dow Jones Industrial Average shed 543.34 points, or 1.5%, to 35368.47, its biggest one-day decline since November. The drawdown was even worse among shares of technology companies and other high-growth firms. The Nasdaq Composite retreated 386.86 points, or 2.6%, to 14506.90, leaving it within half a percentage point of entering a correction. Shares of tech and communication services stocks on the S&P 500 fell 2.5% and 2%, respectively. Meta Platforms, Facebook’s parent, fell $13.75, or 4.1%, to $318.15. Netflix and Alphabet fell at least 2.5% each. The Cboe Volatility Index - Wall Street’s so-called fear gauge, also known as the VIX - ticked up to its highest level in a month. The latest quarterly earnings season hasn’t helped. Several financial companies have reported results showing profits have begun to ebb following a year in which many benefited from the tumultuous pandemic economy. Goldman Sachs was the latest to report Tuesday, showing a decline in fourth-quarter profits, sending shares down $26.54, or 7%, to $354.40 and acting as a major drag on the price-weighted Dow.
Major indexes in Asia broadly closed lower on Wednesday. The Nikkei 225 index fell by 2.8 percent. In Tokyo, shares in the automotive industry and technology companies were the main sellers. Among the individual stocks, Sony slumped by a good 10 percent after Microsoft announced the takeover of computer games manufacturer Activision Blizzard. Investors fear that as a result of the takeover, the popular Activision game "Call of Duty" can only be used on Microsoft's Xbox games console, leaving users of Sony's Playstation out in the cold. Meanwhile, in Hong Kong, the prices of game developers Tencent (-0.1 percent) and Netease (-1.6 percent) are holding up comparatively well. The Hang Seng Index fell 0.4 percent while China’s Shanghai Composite equally declined 0.4%.
Yields on two- and 10-year Treasurys surged to their highest levels in roughly two years on Tuesday as investors returned from a three-day U.S. holiday, factoring in the risk that the Federal Reserve may deliver a half-point interest rate hike in March. Thus, the yield on the benchmark 10-year Treasury note ticked up to 1.866%—its highest level in two years—from 1.771% Friday. The yield on the 2-year Treasury note, which is more sensitive to Fed rate expectations, held above the 1% threshold for the first time since February 2020.
Jefferies raises target Air Liquide to EUR 181 (162) - Buy
Berenberg increases goal ASM to EUR 445 (400) - Buy
Jefferies lifts Enel target to EUR 7.20 (7) - Hold
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