Back to top
Read MoreHide Full Article

Microsoft Corp. (MSFT - Free Report) recently announced that the pre-ordering volumes of Xbox One X have already surpassed all previous records. Per Gamespot, the Scorpio edition appears to be sold out at retailers.

The much awaited device is set to release on Nov 7, for a price of $499.99. The console will be backward compatible with Xbox One and Xbox One S titles which makes it even more lucrative.

We believe the launch of this device will improve Microsoft’s market share in the console space, which is currently dominated by Sony (SNE - Free Report) . Per the IHS Markit data, at the end of 2016, Sony had 57% market share compared with Microsoft’s 26%.

Nevertheless, we believe that the latest improvement will not be a massive one, which will narrow the gap between the two consoles, at least in the near term. Despite impressive features, the lower number of exclusive gaming titles seems to be an offset for the positives.

Microsoft’s shares have gained 19.2% year to date, underperforming the 24.0% rally of the industry it belongs to.

Feature Laden Xbox One X Edges Out PS4 Pro

In comparison with Sony's Play Station 4 (PS4) Pro’s four teraflops of processing power running at 2.1 Ghz, the Xbox One X features six teraflops running at 2.3 Ghz. While PS4 Pro has 8 GB of DDR5 memory, the Xbox One X is embedded with 12GB of GDDR5 memory, with 9GB unlocked for developers.

The Xbox One X has the capability of playing native 4K at 60 frames per second (fps). Though PS4 offers 4K content, it does not have the feature of handling games at 60 fps. The Xbox One X can play Ultra-HD Blu-ray disks, whereas the PS4 Pro is not capable of playing 4K Blu-rays. However, both consoles have storage space of 1TB.

Notably, the difference of price between the two consoles is quite high. PS4 Pro, which is already available in the market for around $399, has a much lower price compared with the upgraded version of Microsoft’s gaming console. The elevated price might be a headwind for the sales volume of Xbox One X.

In a recent interview with Eurogamer, Xbox Head Phil Spencer said that Xbox One X is more of a 4K gaming console. Hence, PS4 Pro is more of a competitor to its previous version, Xbox One S, and not the upgraded one.

Lack of Exclusive Games: Headwind for Xbox One X

We believe the lesser number of exclusive games on the upcoming console is a major headwind for Microsoft. A few exclusive games which will be available are Forza 7, Battlegrounds and Cuphead. On the other hand, Sony has a much enriched line-up of exclusive titles for PS4 Pro, namely Gravity Rush 2, Tales Of Berseria, Yakuza 0, Nioh, Horizon Zero Dawn and Persona 5, among many others.

Moreover, we anticipate that the delay in the release of Microsoft’s new game Crackdown 3 will be a negative for the sales volume of Xbox One X.

Zacks Rank and Key Picks

Microsoft currently has a Zacks Rank #3 (Hold)

Better-ranked stocks in the broader technology space are Activision Blizzard, Inc (ATVI - Free Report) , sporting a Zacks Rank #1 (Strong Buy), and Glu Mobile Inc. (GLUU - Free Report) with a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rates for Activision Blizzard and Glu Mobile are projected to be 13.63% and 15%, respectively.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. 

Click here for the 6 trades >>

More from Zacks Analyst Blog

You May Like