Activision Blizzard Share Price ‘Severely Discounting’ Fundamental Improvements

Activision Blizzard (NASDAQ: ATVI) shares are up slightly Tuesday after the company’s stock was upgraded to Buy from Neutral at MKM Partners.

MKM analyst Eric Handler maintained the firm’s $95 per share price target on the stock, telling investors in a research note that the current share price is “severely discounting” Activision’s fundamental improvements and its “strong growth potential” in 2023.

He added that the company’s shares appear much more linked to whether the acquisition by Microsoft (MSFT) gets approved. However, he feels that even if the deal for Microsoft to acquire Activision for $68.7 billion is denied, the stock should warrant an $85 per share fundamental value, providing a potential 15% capital appreciation.

Last week, Raymond James also upgraded Activision Blizzard shares to Outperform from Market Perform, maintaining the $95 per share price target. Analyst Andrew Marok explained in a note to clients that following last year’s announcement that Microsoft had agreed to acquire Activision for $95 per share, Activision shares have traded at a persistent discount to the deal price caused by worries around regulatory bodies stopping the deal, as well as the extended period until deal close.

Marok added that in the months since, trends in ATVI’s core business have significantly improved, making a price decline if the deal breaks down “less precipitous for a standalone ATVI share price.” The analyst also added that he believes the deal will go ahead and as a result, sees ATVI’s risk-reward “as having shifted solidly to the positive.”