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Microsoft (MSFT) Lures Console Gamers With New Xbox at $299

Microsoft MSFT recently introduced its smallest Xbox ever — Xbox Series S — on its official

. It is 60% smaller in size compared with the consoles of the Xbox Series X.  The console will be priced at $299 and will hit retail shelves as early as Nov 10.

Interestingly, the launch of Xbox Series S precedes the highly anticipated launch of the next-generation Xbox Series X gaming console, which is expected to release in the upcoming holiday season.

We believe the two new consoles will enable Microsoft to consolidate its competitive positioning in gaming console space against peers like Sony Corporation SNE. Japan-based Sony is also scheduled to release its upcoming console, PlayStation 5 or PS5 in the holiday season of 2020.

 

This will likely instil confidence in the stock among the investor community. On a year-to-date basis, shares of Microsoft have returned 28.5% compared with the industry’s rally of 26%.

 

What is New in Xbox Series S?

Microsoft has not revealed much of the details for its Xbox Series S console yet. In the official launch trailer, Microsoft has added that the console will support 1440p resolution at up to 120 FPS (frames per second) and will support 4K streaming media playback and 4K upscaling for games.

Gamers can play more than 100 titles on the new console with Microsoft Xbox Game Pass Ultimate subscription. Further, the new Series S console will have an NVME SSD (solid state drive) storage of 512 MB.

Also, it will feature the DirectX Raytracing (DXR) capability that will offer next-gen gamers with enhanced immersive visual and audio experience. Apart from that, the console boasts of ultra-low latency, variable refresh rate and variable rate shading.

Though the SSD is much less compared to the other existing Xbox consoles, it is expected to have an option for removable storage.

With the launch of a cheaper priced console, it looks like Microsoft is trying to attract more customers, especially gamers and non-gamers who do not like to spend so much money on consoles.

Currently, Microsoft’s Xbox One X (1TB) retails at a price tag of over $499, whereas the upcoming Xbox X new console will reportedly be priced at $499. The cheaper console offers compelling value proposition to gamers who are thrifty or are just getting into gaming.  

Meanwhile, Microsoft’s new console under Xbox Series X will be powered by Advanced Macro Devices' AMD 7 nanometer (nm) technology based on 8 core Zen 2 architecture CPU and an RDNA 2-class GPU. Series X also has a high bandwidth GDDR6 memory and NVME SSD offering internal storage capacity of 1 TB. It also has an additional storage expansion card for 1 TB. The specs are well suited for avid and professional gamers.

Traction in Gaming Market Augurs Well

Per a Mordor Intelligence report, the worldwide spending on gaming is expected to reach $257 billion by the end of 2025 at a CAGR of 9.1% between 2020 and 2025. The upside will be driven by COVID-19 induced stay at home trends as well as the launch of newer Xbox and PlayStation console devices. The rapid uptake of cloud gaming is also a solid driver for the gaming market.  Also, rising interest in esports, amid shelter-in-place guidelines, is expected to lead to higher gaming spend.

Per Fortune Business Insights data, the gaming console market is envisioned to hit $51.51 billion by 2027 from $34.27 billion in 2019, at a CAGR of 5.3%.

Moreover, the cloud gaming market is expected to reach $3.2 billion by 2023, from $356 million in 2019 at a CAGR of 123%, according to Newzoo data.

These gaming market growth forecasts strengthen optimism in Microsoft’s gaming initiatives across all devices. Further, the company is constantly integrating Azure’s cloud capabilities into its gaming segment. This will facilitate it to improve gaming strategies and develop better content. We believe that these developments to boost player engagement and provide immersive experience, will keep gaming revenues ticking in the days ahead.

Zacks Rank And Key Pick

Microsoft currently carries a Zacks Rank #3 (Hold).

A better-ranked stock worth considering in the broader sector is Qorvo QRVO, which flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Qorvo is currently pegged at 11.4%.

Zacks’ Single Best Pick to Double

From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.

With users in 180 countries and soaring revenues, it’s set to thrive on remote working long after the pandemic ends. No wonder it recently offered a stunning $600 million stock buy-back plan.
The sky’s the limit for this emerging tech giant. And the earlier you get in, the greater your potential gain

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