Microsoft Stock (NASDAQ:MSFT)
According to Jefferies, Microsoft (NASDAQ:MSFT) has “more than a zero chance” of successfully completing its $69 billion purchase of gaming giant Activision (NASDAQ:ATVI). Still, the company also has alternative triggers if the transaction is canceled.
Jefferies analyst Andrew Uerkwitz, who has a buy rating and $95 price target on Microsoft stock, said on Friday that there is “likely still a less than half probability” that the merger would be authorized. However, he added, “It’s definitely more than zero” than what the company is now pricing.
According to Uerkwitz, Microsoft may try to circumvent the UK’s Competition and Markets Authority to complete the transaction despite the authority’s prohibiting the agreement. This course of action would lead Microsoft to either renegotiate the merger agreement or face a possible legal challenge from the CMA.
Uerkwitz stated, “We don’t believe Microsoft stock should go this far or that it will necessarily go this far; however, based on the commentary from Microsoft, it seems plausible.”
Uerkwitz anticipates that Activision will conduct a repurchase, most likely in the area of $4 billion, if the acquisition is canceled. The corporation could engage in mergers and acquisitions in the near future to strengthen its “IP opportunities.”
Uerkwitz also said that Activision trades at a “reasonable” price.
Uerkwitz noted, “At today’s price, 20x our 2023E estimate is well within its historical ranges.” However, this does not consider the $9 billion of net cash already on the balance sheet or the $12.4 billion that would be on the balance sheet by the end of the year if the acquisition falls through. After the successful release of Diablo IV, the corporation is doing very well in all facets of the business.
According to a report from MLex from the previous week, Microsoft was reportedly looking at other methods to complete the Activision transaction despite the ban placed on it by the UK’s antitrust body.
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