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Microsoft (MSFT) at Xbox E3 Briefing: Project Scarlett & More

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Microsoft (MSFT - Free Report) recently made a slew of announcements at the ongoing Electronic Entertainment Expo (E3) 2019. The company showcased a plethora of new games, comprising 11 world premieres and 14 from Xbox Game Studios as part of Xbox Briefing.

Moreover, the company upped the ante in console gaming with Project Scarlett which is scheduled for a holiday 2020 release. The upcoming console is equipped with AMD (AMD - Free Report) processor, “high bandwidth GDDR6 memory” and a robust solid state drive (SSD). Project Scarlett is aimed at making gaming more immersive.

We believe the new console is likely to help the company gain momentum against peers like Sony (SNE - Free Report) and Nintendo (NTDOY - Free Report) . The improved technical features, which will eventually lead to higher resolution and faster loading of the games, are expected to add to customer base.

Notably, Slipspace Engine gaming studio’s Halo Infinite is also set to release along with Project Scarlett. The game will also be available on Xbox One and Windows 10 PC.

Microsoft announced its intentions to buy Double Fine Productions in order to enhance its exclusive gaming content. Markedly, at Xbox E3, Double Fine Productions demonstrated Psychonauts 2. With this announcement, Xbox Game Studios has a total of 15 development studios under its banner.

We believe the acquisitions will significantly expand the gamer base. The company is well poised to benefit from the operational efficiencies and the combined innovative skills. These factors are likely to bolster originality in its gaming content. Furthermore, the expanding game portfolio bodes well.

Short Note on Xbox Elite Wireless Controller

Xbox unveiled the Xbox Elite Wireless Controller Series 2. The latest controller is loaded with 30 new features including wraparound rubberized grip, adjustable-tension thumbsticks, among others. Moreover, it offers around “40 hours of rechargeable battery life.”

The new controller, priced at $179.99, is scheduled to hit the shelves on Nov 4, across 24 markets. The device is available for pre-order.

Discount on Xbox Game Pass for PC

As anticipated, Microsoft divulged more details on Xbox Game Pass for PC at the ongoing gaming event. The company noted that the beta version of Xbox Game Pass for PC service can be accessed on Xbox app.

Notably, Microsoft Flight Simulator, Age of Empires II: Definitive Edition, and Ori and the Will of the Wisps, are a few of the games that will debut in Xbox Game Pass for PC. Per TechCrunch, Microsoft is introducing the service at a discounted rate of $4.99 per month (with MSRP of $9.99).

The company also rolled out Xbox Game Pass Ultimate subscription plan integrating Xbox Game Pass with Xbox Live Gold service. The bundled service is priced at $14.99, per TechCrunch.

Moreover, the clever bundling and pricing of gaming services are expected to boost adoption, in turn favoring the top line.

Notably, 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.

Robust Developments to Fortify Position in Gaming

Microsoft is likely to gain traction in the console, PC and cloud gaming industry with the aforementioned positive developments, which are instilling confidence in the stock. Notably, shares of the company have returned 32.1% in the past year, outperforming the industry’s rally of 25.6%.



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.

Per latest IHS Markit data, “consumer spending on cloud gaming content subscriptions reached $234 million in 2018 and is forecast to grow to $1.5 billion by 2023.”

These growth projections reinforce optimism in Microsoft’s gaming initiatives across all devices and substantiate the company’s motto of ensuring “Gaming for all.”

The company is consistently integrating cloud capabilities of Azure into its gaming segment which is facilitating it to enhance gaming strategies and improve content. We believe these developments will keep gaming revenues ticking in the days ahead.

Zacks Rank

Microsoft carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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