By Senad Karaahmetovic
Shares of Activision Blizzard (NASDAQ:ATVI) are up over 1% in pre-open Monday after three sell-side analysts upgraded shares, following a pullback on Friday.
Activision stock closed lower on Friday on the report the U.S. Federal Trade Commission (FTC) is likely to file an antitrust lawsuit to block Microsoft’s (NASDAQ:MSFT) $69 billion takeover deal.
Even if the Microsoft takeover falls through, ATVI stock is still "undervalued" says Wells Fargo analysts. The analysts upgraded shares to Overweight from Equal Weight with as risk-reward is "fundamentally asymmetric."
"We conservatively apply a 13.5x multiple to consensus '23 EBIT and account for an incremental $3B of cash on the balance sheet, arriving at a "breakup price" of $76. We believe the market is undervaluing ATVI relative to both outcomes (deal or no deal)," Fitzgerald told clients in a note.
Similarly, Morgan Stanley analysts upgraded to Overweight on "compelling" risk-reward.
"We are incrementally bullish on its position as a leading diversified game publisher, with strength across multiple platforms and genres. While it is challenging to assess the likelihood that MSFT's proposed acquisition receive regulatory approvals, we believe the risk reward is compelling on a fully standalone basis...with a call option of $95 in cash per share, if and when the MSFT deal closes," the analysts said.
ATVI shares were also upgraded at Truist Securities.