Media takeovers have the potential to lift a broad range of stocks in 2019, with speculated deals including CBS Corp.’s (CBS) purchase of Viacom Inc. (VIA), a Walmart Inc. (WMT) buyout of Roku Inc. (ROKU) and the takeover of video game companies such as Electronic Arts Inc. (EA), Activision Blizzard Inc. (ATVI) or Take-Two Interactive Software Inc. (TTWO), according to BTIG’s Rich Greenfield, per Barron’s. The BTIG analyst suggests that the likely acquirers of video game companies with be one of the deep-pocketed FAANG companies.
5 Possible Targets
· Viacom Inc.; Market Cap: $12 billion
· Roku Inc.; $4.4B
· Electronics Arts Inc.; $27.5B
· Activision Blizzard Inc.; $39.2B
· Take-Two; $12.5B
Greenfield has been predicting CBS’ takeover of Viacom for years, noting that with the removal of former CBS CEO Les Moonves, a deal looks more likely.
“Moonves put his own personal self-interest above shareholders,” wrote the analyst in a note published on Monday, adding that rather than renaming a new CEO, the board should immediately reopen merger discussions with CBS.
Video Game Makers
The analyst’s predictions include the purchase of a video game studio by one of the tech giants. Greenfield views privately owned Bethesda as the “most obvious” target, and mentions leading publishers Electronic Arts, Activision Blizzard and Take-Two as candidates.
“While Amazon.com Inc. (AMZN) and Google (GOOGL) are the ones to watch, we would not sleep on Facebook Inc. (FB) and Apple Inc. (AAPL), the former who has been largely unsuccessful in its games ambitions (especially video) since it essentially helped launch Zynga Inc. (ZNGA), and the latter which has a need to diversify its revenue streams,” wrote Greenfield.
As for on-demand streaming hardware and software company Roku, which has sharply outperformed the broader market in 2019 thanks to above average user growth and metrics, BTIG expects Walmart to go in for the kill. As Roku charges ahead in competition with companies like Netflix Inc. (NFLX), an acquisition by a massive retailer could make sense for the over-the-top (OTT) streaming platform.
“If the goal is to increase time spent with Walmart to drive retail spending (as Prime Video does for Amazon), we believe acquiring Roku could be Walmart’s most compelling entry point into streaming video,” wrote Greenfield.
Greenfield believes that 21st Century Fox Inc. (FOXA) will reacquire most of the regional sports networks, YES Network aside, that Walt Disney Co. (DIS) was forced to divest to complete its acquisition of a large sum of Fox assets.
“Fox knows and loves the regional sports networks, with the acquisition of these assets at a fraction of the price that Fox sold them to Disney, adding to New Fox’s sports prowess,” wrote the BTIG analyst.
Greenfield is doubtful that companies such as struggling Snap Inc. (SNAP), AMC Networks (AMCX), and Zynga will sell, adding that he does not expect NBCUniversal, majority-owned by Comcast Corp. (CMCSA), to bail out of consortium-owned Hulu.