Late last week, we noted that,” Recent weakness in the ATVI stock could be a potential opportunity. Even Warren Buffett is a big fan of the ATVI stock. As of 2022, his Berkshire Hathaway firm now holds about 68.4 million shares, or 8.7% of ATVI.”
At the time, ATVI had just been knocked down to about $73.05—and so far, it appears to have created the opportunity we were looking for. Not only did the stock jump about $1.25 on the day, the gaming stock was upgraded by three firms.
Wells Fargo, for example, upgraded the stock to overweight from equal weight, with a price target of $76. “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),” they said, as quoted by Investing.com.
Analysts at Truist also upgraded the stock to a buy from a hold rating. And Morgan Stanley just upgraded the stock to overweight, noting, “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.”
From a current price of $74.72, we’d like to see ATVI again challenge $80 near-term.