Zacks Investment Ideas Top Features: Microsoft, Alphabet and Advanced Micro Devices

For immediate publication

Chicago, IL – August 11, 2022 – Today, the Zacks Investment Ideas feature highlights Microsoft MSFT, Alphabet GOOGL, and AMD’s Advanced Micro Devices.

3 Tech Titans with big acquisitions in 2022

The market performance has been outstanding recently. After a difficult first half of 2022, investors were very pleased with the growth.

While most of the headlines during the year were negative, there were also many positive headlines, such as acquisition news.

Interestingly, several of these announcements come from titans in the tech space such as Microsoft, Alphabet, and Advanced Micro Devices.

Below is a chart illustrating the year-to-date performance of shares of all three companies, using the S&P 500 index as a reference point.

Companies aim to drive growth and increase size through acquisitions. Bigger is better because small companies don’t have the cost savings advantages that larger companies have.

Let’s take a closer look at acquiring each company and analyze the expected benefits.

Alphabet

Alphabet, the parent of Google, is one of the most innovative technology companies in the world, and its Google Cloud platform is achieving significant success. The company is so deeply connected to the network that it is impossible to imagine the Internet without it.

Earlier this year, Alphabet announced plans to acquire Mandiant in a deal valued at $5.4 billion, or $23 per share. Mandiant is a dynamic cyber defense and response solutions provider using Mandiant Advantage software as a cloud-based service platform.

The acquisition is expected to complement Google Cloud’s security strengths. With this transaction, GOOGL plans to enhance its security offering by providing a comprehensive suite of security operations with greater capabilities to help its cloud customers.

Google Cloud has experienced tremendous growth – since 2018, Google Cloud revenue has increased by a remarkable 231%.

Alphabet is known for generating huge revenues and that’s exactly what the forecasts are talking about; For the company’s current fiscal year, revenue is forecast to reach $237 billion, representing a solid 12% year-over-year growth.

Microsoft

Microsoft, another technology titan in the space, has been an incredible investment over the last five years. Recently, the company’s gaming segment has proven to be a solid source of revenue, and Microsoft wants to capitalize on that.

In an attempt to strengthen its position in the gaming industry, Microsoft revealed plans to purchase Activision Blizzard for a whopping $68.7 billion.

Activision Blizzard is a leader in creating video games and a publisher of interactive entertainment content, known for, among others, Call of Duty AND World of Warcraft.

Microsoft’s Xbox Game Pass subscribers have surpassed 25 million, and Activision Blizzard titles now have approximately 400 million monthly active players, representing a significant source of recurring, recurring revenue.

Since 2018, Microsoft’s gaming revenues have increased by as much as 57%.

Moreover, the company’s financial results are in excellent condition; for MSFT’s current fiscal year (FY23), the Zacks Consensus EPS estimate is $10.14, which is strong enough to deliver 10% year-over-year growth.

Advanced Micro Devices

Advanced Micro Devices is a titan in the semiconductor space and one of investor favorites. The company’s broad product portfolio includes microprocessors, graphics processors, motherboard chipsets and personal computers.

AMD announced the acquisition of Pensando, a leading distributed services platform company, in a transaction valued at $1.9 billion. Considering AMD is looking to expand the capabilities of its data center solutions, this seems like an ideal solution.

Pensando claims its programmable packet processor delivers up to 13 times better performance than similar competitor products. Its processor controls the flow of tasks through the hardware infrastructure, offloading tasks from the processor whenever possible, significantly increasing performance.

AMD’s development prospects are excellent. In FY22, earnings are forecast to grow by a remarkable 56% and the company’s revenues are expected to grow by 55%.

Bottom line

While most of the market news throughout the year was unfavorable, there were still some announcements worth celebrating, such as the acquisitions of all three companies above.

Acquisitions enable companies to gain more expertise and technology, giving them the flexibility they need to continually innovate. After all, if companies don’t adapt, the consequences could be serious.

Additionally, acquisitions are generally a sign of good financial health. Growth is on the line and these three companies are just playing together.

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