Microsoft announced plans to acquire gaming firm ZeniMax Media, the owner of video game developer and publisher Bethesda Softworks, for $7.5 billion. Shares of Microsoft closed nearly 1.1% higher on Monday.
The ZeniMax Media deal will give Microsoft (MSFT) ownership rights for Bethesda’s popular gaming label including The Elder Scrolls, Doom, and Fallout. Microsoft intends to add Bethesda’s gaming franchises to its Xbox Game Pass, a $10 monthly library of video games for Xbox and personal computers.
The tech giant expects the deal to be completed in the second half of the fiscal year 2021. The company anticipates the transaction to have minimal impact on its non-GAAP operating income in fiscal years 2021 and 2022. (See MSFT stock analysis on TipRanks)
Following the news, Wedbush analyst Daniel Ives said, “We note that this acquisition comes in the wake of the failed TikTok deal as Nadella continues to remain laser focused on growing the consumer side of the house.” Ives further noted, “While Xbox and gaming have been successful, MSFT recognizes its need for consumer based revenue growth which we believe this deal will directly help drive along.” The analyst maintained a Buy rating on the stock with a price target of $260 (28.4% upside potential).
Currently, the Street has a bullish outlook on the stock. The Strong Buy analyst consensus is based on 26 Buys and 3 Holds. The average price target of $230.14 implies upside potential of about 13.6% to current levels. Shares have increased 28.4% year-to-date.