Video Games

Pre-Market Stock: It’s the biggest deal in gaming. Why is FarmVille Maker so hot?

The Take-Two drop indicates fear among investors that the company is overpaying. The transaction values ​​Zynga at $9.86 per share. Even after Monday’s massive jump, Zynga closed at just $8.44 a piece.

What does Take-Two see? For starters, the deal is a huge opportunity to expand the company’s presence in smartphone gaming, which CEO Strauss Zelnick has referred to as “the fastest growing segment of the interactive entertainment industry.”

On a call with analysts, he said more than half of the combined business will come from mobile games.

“Despite the potential for overpayment, we like this move strategically,” Neil Macker, chief equity analyst at Morningstar, said in a note to clients.

He noted that Take-Two is interested in creating mobile versions of the existing franchises, which also include NBA 2K and Red Dead Redemption. Take-Two will also gain more exposure to this side of the industry through new titles that Zynga is developing. Rival EA struck a deal worth more than $2 billion for Glu Mobile, which makes “Kim Kardashian: Hollywood” last year.

Scale is another factor. Zelnick said the newly merged company would have more than 1 billion users. Macker noted that focusing on mobile gaming could also help Take-Two expand globally.

Currently, the majority of its sales are made in the United States, Macker said, with “a large portion of the rest coming from Western Europe.” But mobile gaming is very popular in countries like India, where owning a smartphone is more common than owning a gaming console or computer.

“While these games have relatively low revenue per person, the sheer size of the player base helps generate significant revenue,” said Maker.

A step back: The gaming sector has seen a massive boom during the pandemic as people flock to entertain at home. In the third quarter of 2021, consumer spending on video games in the United States reached $13.3 billion, the highest level ever during this period and a 7% increase from 2020, according to the NPD Group.

Now, companies are looking for ways to keep users engaged and continue expanding, leading to a slew of industry deals over the past year.

Drake Star Partners recorded 228 partnerships worth nearly $32 billion that were announced or closed during the first nine months of 2021. Other companies in the sector — such as Roblox and Krafton in South Korea — are rushing to raise money from public investors.

There may be more deals on the way, especially as companies look to capitalize on the rush into virtual and augmented reality known as the “metaverse”, and with the increased participation of big tech companies.
Take-Two’s Zelnick did not mention this case when speaking to analysts. But he told the Wall Street Journal that he sees opportunities to take advantage of the popularity of non-fungible tokens, or NFTs, that allow users to buy, sell and trade clothing or weapons in exchange for online avatars.

Jerome Powell pledges to fight inflation in second term

Federal Reserve Chairman Jerome Powell pledged not to allow inflation to become an integral part of the US economy.

The Latest: The US central bank chief will sit for his confirmation hearing before the Senate Banking Committee on Tuesday. In prepared remarks, he vowed to fight price hikes aggressively if he gets the green light for another four years.

“We know that high inflation imposes taxes, especially on those least able to meet the high costs of necessities such as food, housing and transportation,” Powell said.

He said the Fed would use its tools “to support a strong economy and labor market and prevent rising inflation from becoming entrenched.”

Prices have not been stable lately. Consumer prices rose 6.8% in November from a year earlier, the fastest pace in 39 years. The December inflation report, due on Wednesday, is expected to show an acceleration of price gains last month.

Powell said the Fed, Congress and the American people had avoided a “mass depression” when the epidemic broke out in March 2020.

“Today the economy is expanding at its fastest pace in many years, and the labor market is strong,” he said.

Members of Congress from both parties agree. But Powell still faced criticism from lawmakers such as Senator Elizabeth Warren, who believed he was too soft on Wall Street, making him a “dangerous man” for the role.

It also had to respond to a trading scandal by senior Federal Reserve members around the time the central bank announced major policy shifts linked to Covid-19.

On Monday, Vice President Richard Clarida – Powell’s second-in-command – said he would resign about two weeks before the end of his term. The announcement followed reports that Clarida corrected an earlier financial disclosure late last month to show it had sold a stock fund and then quickly repurchased it shortly before the Fed announced the emergency package.

Abercrombie & Lululemon earnings season warning

When companies start reporting results from holiday quarters, there will be a lot of interest in whether the Omicron variable and ongoing supply chain problems are affecting the huge levels of demand.

There are signs of this, in the early letters.

On the radar: Arrow Lululemon (lulu) It fell nearly 2% on Monday after the sportswear company said it now expects revenue and earnings for its current quarter, which runs from November to January, to be in the lower end of the expected range.

“We started the holiday season in a strong position, but have since experienced several consequences of the Omicron variant, including increased capacity constraints, limited staff availability, and reduced hours at certain locations,” CEO Calvin MacDonald said in a statement.

That’s not all: Abercrombie and Fitch (ANF) He said on Monday that while the “strong” holiday period has begun, the difficulty of getting products to stores due to “extended ports and transportation delays” has become a serious problem.

“We didn’t have enough inventory to keep up with customer demand, which resulted in lost sales during the holiday oversold period,” said CEO Fran Horowitz.

However, investors do not hesitate. Shares of Abercrombie are up 5% in premarket trading on Tuesday.

next one

Powell’s confirmation hearing before the Senate Banking Committee begins at 10 a.m. ET.

Tomorrow comes: US consumer price inflation for December. Economists polled by Reuters expect to know prices rose 7% from the previous year.

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