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Microsoft (MSFT) acquires AT&T's Xandr advertising platform
Microsoft MSFT recently disclosed its intention to acquire AT&T's Xandr T-unit from AT&T with undisclosed financial terms. Citing sources familiar with the matter, Bloomberg notes that Microsoft is likely to pay $1 billion to buy Xandr. Microsoft has not specified a time period for completing the purchase, which is subject to regulatory terms and practices.
Xandr is AT&T's Tier 1 partner and the company's global automated advertising marketplace for premium digital advertising. The data-driven Xandr platform provides targeted advertising services that improve data insights. However, AT&T said the purchase of Xandr will not include DirecTV's ad-supported sales.
Microsoft evaluation and consensus
In 2018, AT&T acquired AppNexus and rebranded it as Xandr in the same year. By the second quarter of 2020, the company stopped reporting Xandr as a separate division and included it in WarnerMedia.
Xandr will boost Microsoft's digital advertising business
With Xandr, Microsoft aims to strengthen its position in the digital advertising market in a "post-cookie world." The tech giant said with Xandr it intends to pursue a strategy that not only respects consumers' privacy preferences, but fully understands publishers' interactions with customers and helps advertisers achieve their goal.
Following the purchase, Microsoft intends to combine its knowledge of global audiences, technology and advertising customers with Xandr's advertising solutions to enhance its offering of digital advertising solutions for the open web.
Xandr's technology platforms include Xandr Monefying, Xandr Curate, Xandr Invest and Invest TV, which complement Microsoft's digital advertising solutions such as Microsoft Audience Network, PromotionIQ and the Microsoft Customer Experience Platform. In the year-ago quarter, Microsoft News and Search advertising revenue, excluding traffic acquisition costs (TAC), increased 40% (39% in constant currency) due to the rebound in the advertising market.
For the current quarter, Microsoft expects search and information advertising revenue, excluding traffic acquisition costs (TAC), to grow 20% to 50% as a result of advertising optimization worldwide. market. The company also said that ongoing supply chain disruptions have the potential to affect advertising budgets and undermine earnings.
Zacks Rank and Stocks to Consider
Microsoft currently has a Zacks Rank #3.
Some of the top-rated stocks in the broader technology sector include Arrow Electronics ARW and Alphabet GOOGL. Both stocks have a Zacks #1 (strong buy) rating, you can see a full list of today's Zacks #1 stocks here.
For Arrow Electronics, the Zacks Consensus Estimate is set for 2021 earnings at $14.60 per share, up 8.1% over the past 60 days. The company's long-term earnings growth rate is 27.4%.
Arrow Electronics' earnings beat Zacks estimates made in each of the previous quarters, averaging an astounding 18.6%. The company's stock is up 30.6% since the beginning of the year.
The Zacks Consensus Estimate for Alphabet's 2021 earnings is set at $108.29 per share, up 6.3% over the past 60 days. The company's long-term earnings growth rate is 25.8%. Alphabet's earnings have beaten Zacks expectations over the past four quarters, averaging an astounding 41.5%. The company's stock is up 63.7% this year.