Activision Blizzard can generate returns for shareholders regardless of if the Microsoft deal goes through, Deutsche Bank said. Analyst Benjamin Soff upgraded the gaming stock to buy from hold and raised his price target by $7 to $90. That target share price reflects an upside of 15.1% over Wednesday's close. In 2022, Microsoft proposed buying the "Call of Duty" maker for $68.7 billion in cash. But the deal has run into speedbumps — with some questioning if it will actually be able to go through — as regulators raised competition concerns . "We remain cautious on the regulatory approval process for Microsoft's acquisition of Activision due to the increased scrutiny over big tech by regulators across the US, UK and Europe," Soff said in a note to clients Thursday. "However, we believe that Activision is well positioned on a standalone basis, and that its well capitalized balance sheet can support attractive shareholder returns." Last week, the UK's Competition and Markets Authority said in provisional findings on the deal that it could result in "substantial lessening of competition in gaming consoles and cloud gaming services in the UK." The agency also said that Microsoft could see commercial benefit to moving "Call of Duty" exclusively for Xbox and making other titles solely available in cloud gaming. The filling said potential solutions would include blocking the merger, covering parts of Activision Blizzard's business through divestures or utilizing behavior remedies. Soff said he thinks the best and more likely option would be for a settlement or behavioral remedy such as the offer Microsoft made to give Call of Duty on PlayStation to Sony for a decade. Though Soff said the deal falling through could lead to a short-term sell-off, he sees a path to providing strong shareholders if the purchase does not go through. Despite headwinds to consumer spending, Soff expects health growth and predicts the company's 2023 releases will be commercially successful. He said consumers continue to engage with its brands despite getting more selective as inflation pinches pocketbooks. "Call of Duty" specifically took market share from other titles during the holiday season, he said, while the 2023 premium release should help sustain momentum. He also said brands specific to Blizzard began meaningfully contributing this year, driven by the strong performance of "Overwatch 2," "World of Warcraft," "Dragonflight" and "Diablo Immortal." And the company was able to buck negative mobile gaming trends, with Soff pointing to Candy Crush's January momentum as one example. Overall, Soff forecasted growth of 12% for net bookings and 17% for operating incomes in 2023. That comes in ahead of the growth rate of "at least" high-single digits expected. — CNBC's Michael Bloom contributed to this report.
