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Microsoft Fortfies Position in Gaming With Xbox Game Pass

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Microsoft (MSFT - Free Report) recently announced that it will roll out the console-based Xbox Game Pass to PC gamers. The announcement was made in a blog post by Head of Xbox, Phil Spencer.

With Xbox Game Pass for PC, the players will be able to access more than 100 PC games. Also, the PC gamers can avail titles from popular publishers and developers including Deep Silver, Bethesda, Paradox Interactive, Devolver Digital, SEGA, to mention a few.

We believe the extension of Xbox Game Pass to PCs will enable Microsoft to strengthen competitive position against fellow console makers like Sony and Nintendo.

Into the Headlines

Xbox Game Pass for PC users can avail discounts on Microsoft Store on Windows with up to 20% off on games present in the library and around 10% on other add-ons.

Spencer states that the new games will be added on a monthly basis. Further, games from recently-acquired studios — inXile and Obsidian — will be included in the subscription service.

Although, pricing of the new service is kept under wraps, it is important to note that Xbox Game Pass subscription for consoles costs approximately $9.99 per month.

Microsoft will divulge more details on Xbox Game Pass for PC at E3 2019 gaming event on Jun 9.

What Investors Should Know?

Microsoft is leaving no stone unturned to enhance its gaming business by making it as inclusive as possible with ongoing initiatives. Notably, gaming is now evolving from console to cloud-based platforms. In this regard, expanding the option of devices is noteworthy.

Moreover, the company is consistently integrating cloud capabilities of Azure into its gaming segment. This is facilitating the company to innovate gaming domain beyond exclusive gaming content on X-box consoles.

The gaming market is projected to hit $174 billion by 2021 from $134.9 billion estimated in 2018, per a report by Newzoo. Additionally, per IDC data as revealed by DisplayDaily, worldwide market for gaming desktops, monitors and notebooks is projected to grow 8.2% on a year-over-year basis and reach 42.1 million devices shipped in 2019.

Given the significant demand for PC gaming, high adoption of Xbox Game Pass for PC service is expected to drive gaming revenues growth.

In the last reported quarter, Microsoft’s gaming revenues jumped 5% (7% at cc) to $2.36 billion (contributing 10% to total revenues). Robust performance from Xbox software and services (up 15% at cc) on the back of third-party title strength is a key catalyst.

We believe Microsoft’s domain expertise in gaming and strength in Azure sets it apart from peers in cloud and gaming sectors.

Zacks Rank & Other Key Picks

Microsoft carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the broader Computer & Technology sector include Autohome Inc (ATHM - Free Report) , Match Group, Inc (MTCH - Free Report) and Cirrus Logic, Inc (CRUS - Free Report) , each sporting 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 Autohome, Match Group and Cirrus Logic is pegged at 20.9%, 15.2% and 15%, respectively.

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