Rumors swirled last week that Amazon could make the next blockbuster gaming deal of 2022.

Game publisher Electronic Arts ( EA -2.75%) has been at the center of buyout rumors for most of 2022. The $35 billion giant is responsible for some of the most popular titles in the world, including FIFA , Madden NFL , and Battlefield .

Business commentators have explored the possibility of a few large companies absorbing Electronic Arts, including Walt Disney and Apple . But last Friday, a Swedish publication dropped the news that e-commerce giant Amazon ( AMZN -0.01%) was all set to make a bid, and it sent Electronic Arts stock price surging as much as 14% in pre-market trading.

Cold water was thrown on the story by follow-up reporting from the business news channel CNBC. But hypothetically, what would this acquisition actually mean for Amazon? Here’s why Amazon stock is a buy whether the rumors are true or not. Amazon has an indirect gaming presence already

Most gamers would be familiar with Twitch, a platform that allows players to livestream their in-game sessions to the world and monetize their audiences in the process. It has an estimated 140 million monthly active users and is owned by Amazon.

Additionally, Amazon Prime subscribers have complimentary access to Prime Gaming, which offers its members digital gifts. These can vary from downloadable PC games Prime subscribers can keep to in-game upgrades for popular titles, like Battlefield , to help players improve their characters and profiles.

All Electronic Arts’ games are already available to buy through Amazon because the company has an online store on Amazon.com. That means Amazon is already earning revenue from this partnership without the operational burden of owning the company. How the e-commerce giant could derive further benefit from an acquisition is a little murky, though it’s not unusual for Amazon to aggressively expand into new industries.

There are some potential synergies, though. Amazon’s cloud computing brand, Amazon Web Services (AWS), is a major partner of Formula 1 racing, helping the sport design its cars and engage its fans. And Electronic Arts is the official developer for Formula 1’s flagship racing game, which could help Amazon build a much deeper relationship with the highly popular global sport.

But take Microsoft , for example. It’s currently trying to close a blockbuster $68.7 billion deal to buy game studio Activision Blizzard , pending regulatory approval. That deal is more obvious because Microsoft makes the Xbox game console and is experimenting with a new online platform called Xbox Cloud Gaming. The platform allows users to access their favorite games in the cloud, eliminating the need to download updates and patches constantly.

If Microsoft were to successfully close the Activision deal and buy Electronic Arts, it could offer the companies’ entire catalogs through the new platform and keep all the revenue in the process. Amazon buying Electronic Arts would remove such potential. Diversity is Amazon’s specialty

Amazon has a market valuation of $1.3 trillion right now. Although e-commerce makes up over 80% of its revenue, the company has a dominant presence in several other areas. Its AWS business is the world’s leading provider of cloud computing services. It also has a booming advertising segment, and its Prime streaming platform just spent $1 billion developing the new Lord of the Rings: The Rings of Power TV series.

On top of that, the company owns an 18% stake in electric vehicle maker Rivian Automotive .

Therefore, Amazon gets linked to potential acquisitions all the time. Earlier this year, Wall Street was hot on the idea that the company could buy at-home fitness equipment provider Peloton Interactive . It never happened, but last week, Peleton and Amazon announced a large, mutually beneficial partnership.

Is the acquisition of Electronic Arts likely? At this stage, it appears not. But if it did happen, would it be surprising? Also no. I wouldn’t bet against Amazon finding a way to parlay such a move into a significant financial benefit for investors. Amazon stock is a buy either way

Let’s zoom out for a moment and observe the big picture. In Amazon’s first year as a public company (1997), it generated $147 million in revenue. That figure is projected to top $522 billion in 2022, representing a mind-blowing 38% compound annual growth rate over the 25-year period. Experimenting in new industries can lead to a bumpy ride sometimes. In the second quarter of 2022, Amazon lost $2 billion across its businesses, mainly because its stake in electronic vehicle maker Rivian materially declined in value […]

source Could Amazon Dive Further Into Gaming? Why the Stock Is a Buy Now, Anyway

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