3 Analysts Weigh In On Court Ruling Favoring Microsoft's Activision Blizzard Deal: 'A Major Black Eye For The FTC'

Shares of Activision Blizzard Inc ATVI  rallied by 10% on Tuesday (before dropping 1% on Wednesday), after Federal Judge Jacqueline Scott Corley ruled in favor of Microsoft Corporation's MSFT acquisition of the video game publisher behind the mega-popular "Call of Duty" franchise.

Wedbush Securities On Microsoft Corporation

Wedbush Securities analyst Daniel Ives maintained an Outperform rating and a $375 price target. Ives also described the District Court judge's decision to deny the Federal Trade Commission's (FTC) request for a preliminary injunction on the deal as a "major victory" for Microsoft.

"We also believe this is a major black eye for the FTC and anti-tech Chair Lina Khan as this case in the eyes of many in the industry and the Street never had merit to block the deal," the analysts wrote.

"Furthermore, we believe the floodgates now could open for Big Tech to do more M&A looking ahead as this ruling was also an important victory for the broader tech industry that will be felt in the Beltway for years to come," the Wedbush note added.

Ives also predicted Microsoft would close the deal by next Tuesday, and that the Redmon-based tech giant would reach an agreement with the UK's Competition and Markets Authority so that the regulator approves the acquisition.

"We expect Microsoft to move forward to close the deal by next Tuesday, and expect the company to carve out its Game Pass subscription service in the UK in order to comply with the Competition & Markets Authority (CMA) ruling blocking the merger," the analysts stated.

"Activision was a key asset for Microsoft to own and this should catalyze its consumer franchise," Ives concluded.

See Also: Microsoft-Activision Deal Roadblock Lifted As Judge Denies FTC's Injunction Request

Benchmark Company On Activision Blizzard Inc

Benchmark Company analyst Mike Hickey reduced his rating on Activision from a Buy to Hold because Activision's share price exceeded his $90 price target on "speculation that Microsoft will successfully acquire Activision for $95."

"Our original thesis was a belief that investors would either be rewarded with a meaningful share return to MSFT’s $95 bid or our fundamental valuation of $90 PT if the deal had been abandoned. ATVI is delivering on a meaningful product cycle that should drive record growth," Hickey said.

"The news yesterday that a federal judge has approved MSFT’s acquisition of ATVI moved the share price toward the takeout consideration and effectively our thesis has now been realized," he added.

Stifel Financial Corporation On Activision Blizzard Inc

Stifel Financial Corporation analyst Drew E. Crum lowered his investment rating on Activision from Buy to Hold, while raising the price target from $88/share to $95/share.

This rating follows "a flurry of regulatory developments that (we believe) further support a favorable outcome for Microsoft in its bid to complete the acquisition of Activision Blizzard," Crum said.

The analyst also believes this is not only good news for Microsoft, but for other video game developers as well: "In terms of read-through across our coverage universe, while difficult to predict M&A, we think a successful Microsoft/Activision Blizzard tie-up strengthens the consolidation thesis for larger third-party publishers, and thus view this update favorably for names such as Electronic Arts Inc EA and Take-Two Interactive Software Inc TTWO."

MSFT Price Action: Microsoft Corporation gained 1.42% to close at $337.20 on Wednesday.

ATVI Price Action: Shares of Activision Blizzard fell 1.09% to $90.00 on Wednesday.

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