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Microsoft Playing the Long Game with Improved Xbox Services
During 2020 pandemic lockdowns, video games quickly became a hobby for many looking to pass their newfound free time, and the trend seems to be here to stay. Created and owned by the Microsoft Corporation (MSFT), Xbox and gaming make up a sizable portion of the multinational technology company’s revenue stream. If one is to invest, Xbox’s details cannot go overlooked. (See Microsoft stock charts on TipRanks)
Bradley Sills of Bank of America analyzed updates from Microsoft, stating that Xbox plans to release many more exclusive game titles, has strategies to raise engagement with its subscription service Game Pass, and has a new cloud-based gaming service called xCloud.
Sills maintained a Buy rating on Microsoft and assigned a price target of $305, reflecting a potential upside of 14.87% from Tuesday’s closing price of $265.51.
After virtually interviewing the Xbox CFO, the five-star analyst concluded that the recurring payments made for gaming subscription services are paramount to increasing margins. That is especially true because Game Pass users on average spend “8x more time on each game compared to non-Game Pass gamers.” Driven as well by in-game purchases, Sills expects Game Pass revenue to soon eclipse that of the general Xbox business.
In addition to Game Pass, Xbox has implemented a beta version of its new cloud-gaming service, xCloud. Sills elaborated that the service will be available for streaming to any device, thus connecting the global gaming community of more than 2 billion people. Far exceeding the current 200-300 million console gamers, Sills expects xCloud to generate substantial subscription-based revenues.
Sills, of course, acknowledged the global semiconductor chip shortage, but he was optimistic that the supply chain challenges would ease up in time for the holiday shopping season.
On TipRanks, MSFT has an analyst rating consensus of Strong Buy, based on 26 Buy ratings. The average analyst Microsoft price target is $298.76, suggesting a potential 12-month upside of 12.52%.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.