Activision Blizzard was added to Wedbush's Best Idea List with the firm expecting the game maker's $69 billion sale to Microsoft "highly" likely to completed within the next six months.
Microsoft (MSFT) is likely to make formal guarantees around the availability of Activision content, such as making "Call of Duty'' available on Sony's (SONY) Playstation for the next decade, Wedbush analyst Michael Pachter wrote in a note.
The Wedbush recommendation comes after a Politico report last Wednesday that the FTC is likely to file an antitrust lawsuit to block the $95/share Activision deal. On Monday, Reuters reported that Microsoft (MSFT) is likely to soon offer the European Union concessions in order to dismiss objections to its Activision deal. Microsoft's plan would be a 10-year licensing deal with Sony (SONY).
Pachter highlighted that the combined Activision/Microsoft will still have just 10% or so of the combined worldwide video game market, behind Tencent (OTCPK:TCEHY) and Sony (SONY).
"We think that regulatory challenges in the U.S., U.K., and E.U. are unlikely to materialize in a formal manner, and even less likely to succeed if they do," Pachter wrote.
If the Activision deal doesn't get done, Pachter expects the game maker's shares will eventually get towards his $95 price target due to a combination of "strong profit potential" and a high net cash balance.
"Simply put, Activision Blizzard is moving past the COVID-19 slowdown to development at a faster rate than its large peers, has a strong 2022 – 2023 release slate, and is set to be acquired at $95 per share relatively soon with only a small chance of the deal not being completed in our view," Pachter wrote.
The Wedbush comments come after Morgan Stanley, Wells Fargo and Truist on Monday raised their ratings on Activision (ATVI), pointing out that the stock is discounting both the potential Microsoft (MSFT) deal and an overall improvement in the business.
On Wednesday Dealreporter said that a recommendation by Federal Trade Commission on the Activision (ATVI) deal is expected by mid-December, with the FTC making a decision in January.