Goldman Sachs, GameStop, AMC sink amid larger market rout

Yahoo Finance's Jared Blikre takes a look at several trending stocks, including Activision ahead of its purchase by Microsoft, Goldman Sachs, and meme stocks GameStop and AMC.

Video transcript

ALEXIS CHRISTOFOROUS: Of course, bucking the trend today is Activision Blizzard, and for good reason. Microsoft is going to spend nearly $75 billion in an all-cash deal to buy up the video-game maker. Of course, it's got lots of franchises, including "Call of Duty."

With a closer look at that deal and some more big tickers today, let's bring in Jared Blikre. So, Jared, I'm seeing a report here in the "Wall Street Journal" that CEO Kotick is going to be stepping down once this deal closes with Microsoft. I know the company has been embroiled with accusations of misconduct on the part of employees.

JARED BLIKRE: Yes, and that's been a big focus, and we'll get to that in a second. There's also an antitrust angle as well. We know that Microsoft has been hauled in front of regulators, facing FTC probes and whatnot for years. So a lot to digest here.

This is a big deal. It's a $69 billion deal, Microsoft's biggest acquisition ever. And this would put Activision Blizzard at $95 a share.

And I want to direct everybody's attention to the YFi Interactive where I have a year-to-date chart of Activision Blizzard, and you can see the price is $81.55. So the market, I think, is discounting a bit maybe some more possible fallout with respect to that internal investigation regarding allegations of discrimination, but also you have to consider the antitrust aspect.

So I have a couple of analysts who are weighing in on this. This is Betty Chan of Elevation. She's saying the primary antitrust review focus will be the combination of Activision's board along with its leading game portfolio with Microsoft's consoles and hardware system. Of course, Microsoft has the Xbox platform as well.

The analyst expects approvals will be required in the US, EU, and China, sees the deal's end of 2022 closing as possible despite the company's fiscal 2023 guidance, and also saying the combined business will become the sector's third largest by revenue behind Tencent and Sony. Also have a comment from Stifel saying the firm likes the deal as it meaningfully expands Microsoft's first-party content, especially with respect to mobility.

And let's go back to the charts here. Let's take a two-year view of Activision Blizzard. This is a company that saw quite a precipitous drop down from its early 2021 highs, and you see that there. If we put a max chart on, you can see still how the volatility has increased as the shares' price has risen.

So all in all, a pretty exciting deal for the space, and I just want to show some of the other stocks that are up in sympathy. We have Electronics Arts and we also have Playtika, although a lot of those gains have been given back so far today.

KARINA MITCHELL: All right, Jared, and then here's something we don't see very often, Goldman Sachs down by the most since 2020. Part of the reasons, expenses jumped in their latest earnings report, up by 10%, and wages up by a whopping 33%.

JARED BLIKRE: That's right. They're having to pay to play, and the CEO, David Solomon, says they're going to keep doing the same. They're going to have to pay whatever compensation is required to retain talent.

Now, this is a one-year view. Let's bring this back to a shorter time frame. Here's what Goldman has done over the last month, and you can see have gotten hit a little bit recently. Over the last six months, you can see a pretty pricey-- pretty choppy trading action except for today, just falling below support. So if the stock can find support at these levels, difficult to say. Not really anything interesting in the pattern there, although I will say the trend on the longer term definitely up. The stock having really benefited from the widening steepening yield curve that we've been noting.

Now, I want to point out some analyst commentary here. We have Evercore. They hold the stock or recommending the stock with an outperform price target of $445. That's about $90 above the current price. And they're saying almost every revenue line beat but comp and noncomp inflation was higher than [INAUDIBLE]. EPS came in below expectations. And those compensation charges, as we've been seeing in a wide variety of firms, really eating at bottom lines.

Here's what RBC is saying. They recommend it with a sector-perform price target, $435, saying Goldman Sachs posted a relatively weak quarter versus expectations as weaker-than-anticipated results in global markets as well as higher expenses drove the underperformance. Company continues to deliver best-in-class results in its investment banking and markets business, and that's really where we saw Goldman Sachs shine. And I guess when you take a look at some of their fixed-income and equities-trading income, that was a little bit of a disappointment, much like JP Morgan that we saw last week.

ALEXIS CHRISTOFOROUS: For sure, but the deal making remains strong. It looks like some of those speculative--

JARED BLIKRE: Yes.

ALEXIS CHRISTOFOROUS: --trades just can't catch a bid today. I was checking crypto. All the major crypto lower. And also the meme stocks, GameStop and AMC, is that just-- are they just getting sort of caught up in all the selling today, or is there some news there?

JARED BLIKRE: I have not seen any news, and as we know with meme stocks, it doesn't take a whole lot of news, but you can see all the red and dark red on your screen. I think this is just a sentiment indicator on the market. We've seen money flow out of a lot of the sectors that got hot at various times in the previous two years, and this is a sector that is just-- well, not sector, but this is a group of stocks that has really faltered.

Here, let me show you AMC. It's down 10% today. Let me just put a two-month chart on so we can see. From the upper left to lower right, that's not what you want to see in a chart. It's down 54%. GameStop, pretty similar story, down 48% over the last two months. So we've been tracking some of the weakness in software over the last two months, and it just happens to be that we're also seeing the same kind of weakness here.

Before I go, I'll just put a year-to-date performance in here, and we can rank it. And we can see Naked Brands down 51%. That is the worst performer this year. Also Dave-- notably the Mark Cuban-sponsored personal-finance app. That is down 40%. Guys.

ALEXIS CHRISTOFOROUS: All right, thanks a lot, Jared.