R.W. Baird’s Colin Sebastian this morning points out in a note to clients that “the global interactive entertainment industry will reach ~$145 billion in revenues by 2020, on track to become the largest segment of media and entertainment globally.”

Microsoft made some headlines on Sunday, announcing it would buy four game-making studios, Playground Games, Ninja Theory, Undead Labs and Compulsion Games, and that it is also forming its own new studio, called The Initiative, and based in Santa Monica. The Seattle Times’s Rachel Lermanhas more on the Microsoft’s stepped-up investments.

In response, Mark Moerdler of Bernstein reiterates an Outperform rating on Microsoft shares, writing that it’s “unlikely that Microsoft will make any large content-creation acquisition after these announcements,” something that had been a question on the part of investors since the beginning of the year.

Microsoft stock is up 2 cents to $101.65 in early trading.

EA Makes a Play for Fortnite

Piper Jaffray’s Michael Olson, who considers Electronic Arts his “focus name for the next six months,” reiterates an Overweight rating and a $148 price target, after the company over the weekend announced new features for its “Battlefield” series that may help the company compete with the international gaming sensation
“Fortnite,” a so-called free-to-play game that has been stealing players away from traditional titles.

“EA confirmed that Battlefield V (shipping Oct CY18) will have a ‘Fortnite-like’ Battle Royale modeincluded in the game,” writes Olson.

“This could help Battlefield regain any market share lost to Fortnite & PUBG, although we believe any share loss for Battlefield has been minimal,” he continues. “Perhaps more importantly, it will provide another way for EA to drive higher engagement with the Battlefield player base.” Likewise, Drew Crum of Stifel Nicolaus reiterates a Buy on EA, writing that the he thinks the company’s outlook for the fiscal year “embeds conservative assumptions for Battlefield V.”

EA stock is up $1.92, or 1.4%, to $139.79.

Facebook’s Scandal vs Instagram

Shares of Facebook (FB) are down 63 cents to $188.47, after investors had the weekend to mull over the latest disturbing revelation about the company’s data sharing — the story Friday in The Wall Street Journal by Deepa Seetharaman and Kirsten Grind saying Facebook allowed some companies special access to user data after it formally cut off such access in 2015.

“The company said it allowed a ‘small number’ of partners to access data about a user’s friends after the data was shut off to developers in 2015,” the authors write, citing company statements and remarks by unnamed sources. “Many of the extensions lasted weeks and months, Facebook said. It isn’t clear when all of the deals ultimately expired or how many companies got extensions.”

The focus this morning, however, is not on that data sharing. It’s on Instagram, Facebook’s photo-sharing property.

KeyBanc’s Andy Hargreaves reiterates an Overweight rating on Facebook stock, and a $245 price target, writing that Instagram will cross the one-billion-user mark this year, with monthly average users rising 24%, to 1.1 billion, and he thinks advertising revenue at Instagram will double to $8.9 billion this year.

By 2020, Instagram may have $22 billion in revenue, he opines, and perhaps 1.4 billion users by then. Why? “Given the easily digestible picture/short-video format and attractiveness of a young and engaged audience, we believe Instagram produces an advertising environment conducive to delivering messages and measuring performance throughout the funnel.”

Intel’s Stock Valuation Challenged

Intel (INTC) shares are down 35 cents, or 0.6%, at $54.70, after Instinet’s Romit Shah this morning warned the company faces “stiff competition” from Advanced Micro Devices (AMD) in server microprocessors this year, after talking with Intel Chief Executive Brian Krzanich last week.

As a result, Intel’s price-to-earnings multiple will have a hard time expanding from a recent 14.3 times forward earnings, warns Shah, who maintains a Buy rating on the stock.

Shah relates that Krzanich “was very matter-of-fact in saying that Intel would lose server share to AMD in the second half of the year,” which is not news, but he thought it significant that “Mr. Krzanich did not draw a firm line in the sand as it relates to AMD’s potential gains in servers; he only indicated that it was Intel’s job to not let AMD capture 15-20% market share.”

The problem is that Intel’s move of its chips to the next-smallest feature size, 10 nanometers, is stuck in production issues and therefore the parts continue to be late to market.

That means “the burden is on [estimate] revisions to drive continued outperformance” of Intel’s stock, and “we are less confident about further multiple expansion.”

On a related note, I wrote over the weekend in Barron’s print edition that Intel is among tech stocks whose valuation multiple have had a hard time expanding this year.

AMD stock is down 6 cents, or 0.4%, to $15.19, in early trading.

Match Won’t Be Crushed by Facebook

Online-dating titan Match Group (MTCH) is up $1.66, or 4%, to $43.18, after Jefferies & Co.’s Brent Thill this morning raised his rating on the shares to Buy from Hold, and raised his price target to $50 from $40, after having cut his rating when Facebook announced it would begin to let users pursue dating on its property, something that shook Match shares at the time.

Now, he’s less worried. “Our checks show many users do not wish to commingle dating with social media, & FB’s product will likely appeal to an older demographic rather than millennials on Tinder,” writes Thill.

He cites a survey he conducted of 600 online daters, of which 43% of “said they would definitely use FB for dating, and 61% said it would be an additive product rather than a replacement.”

“~60% of respondents are on more than 1 dating app,” he notes. “In terms of usage amongst our panel, MTCH owns the top 3 brands (Tinder, Match.com, OkCupid).”