Activision Joins Wedbush’s Best Ideas List. Microsoft Can Address Regulators.

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Wall Street is still worried antitrust regulators could force Microsoft to ditch its acquisition of

Activision Blizzard
.
With the Call of Duty maker’s shares trading at a steep discount to the $95 all-cash takeout price, Wedbush added the stock to its best ideas list.

Activision stock (ticker: ATVI) was up 1.8% to $75.30. Anyone who buys the stock at this level nets $19.70 a share in profit if the deal goes through or should want to own it if the deal falls apart. Wedbush analyst Michael Pachter wrote Thursday he expects the deal will go through in the next several months.

Shares fell last week after Politico reported the Federal Trade Commission was likely to challenge the deal, citing three unnamed sources.

“The crux of the regulatory review is whether consumers will be disadvantaged by the acquisition,” Pachter wrote. “Our belief is that the transaction actually has the potential to benefit consumers through more widespread accessibility to high-quality video game content that leverages a diverse array of monetization models.”

The deal’s biggest critic has been Sony, (SONY) which has argued that

Microsoft

(MSFT) has acquired key titles and kept future releases exclusive to its platform in the past. Pachter, who has an Outperform rating and $95 price target, believes

Microsoft

will commit to maintain the status quo by keeping Activision content available on

Sony

‘s PlayStation platform.

Barron’s reiterated a bullish view on Activision last month, arguing that Activision shares looked more attractive since the company’s underlying business prospects have improved and antitrust concerns appear overblown. A host of Wall Street analysts have raised their ratings on the stock in recent weeks citing the firm’s improving game release pipeline.

“If we are correct that Microsoft will commit to maintain the status quo as it relates
to content availability in a legally binding agreement, the regulators will likely be
unable to argue that the combination is anti-competitive,” Pachter wrote. “In addition, the combined market share will be just above 10% in an industry worth around $200 billion, with the two larger competitors based overseas in China (Tencent) and Japan (Sony).”

Write to Connor Smith at [email protected]