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Xbox Series X Launch: 3 Key Takeaways for Microsoft Stock Investors

In an industry-moving event, Microsoft (NASDAQ:MSFT) is launching its Xbox Series X and Xbox Series S consoles today. These next-generation gaming consoles come after much anticipation — and on the back of several catalysts that could boost MSFT stock. Importantly, whether you are a die-hard gamer or just a curious tech investor, the Xbox Series X launch should be on your radar.

A digital rendering of the Microsoft (MSFT) Xbox Series X console.

Source: Mr.Mikla / Shutterstock.com

So, what exactly do you need to know?

The main narrative is that this week marks a return to what many see as a war between console makers. Today Microsoft makes its move, unveiling its Xbox Series X for $499 and its lower-cost Xbox Series S model for $299. That is just the beginning. On Thursday, rival Sony (NYSE:SNE) will take its turn, launching the PlayStation 5.

Leading up to these console launches, fans have been battling it out in support of their favorite brands. Which console has more exclusive games? What about pricing? And did Microsoft or Sony better embrace tech advancements with these consoles?

However, beyond deciding which console to add to your holiday shopping list, investors should take note. Especially amid the novel coronavirus pandemic, MSFT looks hot thanks to the Xbox Series X launch. Customers are already scrambling to buy the console from Target (NYSE:TGT), GameStop (NYSE:GME) and Best Buy (NYSE:BBY). These retailers will have limited availability during the launch day, and demand appears high.

With the launch underway, here are three key takeaways for MSFT investors.

Takeaway No. 1: The Coronavirus Should Boost MSFT Stock

Unlike so many other industries, the world of video games found success during the pandemic.

Why? Well, normal life came to a screeching halt at the beginning of March. Stay-at-home orders. Remote work. Virtual learning. Historically high unemployment levels. All contributed to a catalyst in which consumers were at home more than ever before, and they had a lot of time on their hands. Gaming quickly became the perfect solution.

Not only is it easy to sink hours in video games, they also offer a much-needed escape from reality. Consumers dove into new release Animal Crossing: New Horizons largely because it offered a break from all the horrors the pandemic and resulting recession brought. But the newest Animal Crossing game was not alone. Americans spent $10.86 billion in the first quarter on video games. Then, the month of May saw game sales hit $977 million, up 52% year-over-year.

That trend continues. Although some schools and workplaces have reopened, many consumers remain indoors, at least more often than before. Industry experts predict that 2.7 billion gamers will send almost $160 billion on games by the end of 2020. In just three years, the total market will surpass $200 billion.

The Xbox Series X launch may then be coming at a perfect time. New consoles from Microsoft and Sony will provide another boost to the red-hot industry, incentivizing gamers to stay engaged. Importantly, even before the pandemic, experts believed these consoles would do great things for the industry. Customers who buy a new console will likely boost the stocks of gaming retailers and accessory makers. That means it is a win-win situation for everyone involved.

Keep an eye on the coronavirus catalyst. MSFT stock could seriously benefit if all goes well.

Takeaway No. 2: Microsoft Faces Steep Competition

The timing of the launches from Microsoft and Sony are not coincidental. Xbox and PlayStation consoles each have loyal followers, and the battle has always been tense.

Importantly, many believe that Microsoft is overall the loser. Multiple PlayStation consoles have become best sellers, whereas Xbox sales remain relatively weak. Sony historically has owned more game studios, giving it access to more exclusive launches and better titles.

If that is all true, why should investors pay attention to MSFT stock here?

Well, it looks like Microsoft could really be embracing the challenge this year. Just seven weeks before the Xbox Series X launch, it acquired ZeniMax, the parent company of gaming studio Bethesda. As Kellen Browning and Steve Lohr wrote for the New York Times, the ZeniMax acquisition gives Microsoft a solid answer to the big title question. In fact, Microsoft now owns 23 game studios, giving it an edge over Sony. Even more importantly, through ZeniMax, it has gained access to popular titles like The Elder Scrolls, Fallout, Doom and Quake.

Also in advance of the Xbox Series X launch, Microsoft announced a new partnership with GameStop. Together, the companies will work to bring more customers into the Xbox ecosystem. GameStop will offer a monthly payment plan that allows customers to purchase the Series X and Series S consoles with lower initial costs. As you may know, payment installments have gained in popularity and power during the pandemic.

So what is the bottom line? Essentially, this looks like the year that Microsoft could really hold its own in the console wars. Although it has delayed the release of the two games exclusive to the Xbox Series X, it is investing in its long-term gaming potential. As Sony and Amazon (NASDAQ:AMZN) ramp up their own efforts, it is important that Microsoft recognize and act on the challenges at hand.

Takeaway No. 3: Xbox Series X Has Impressive Tech

Investors should also note that the Xbox Series X launch nicely intersects with other business initiatives at Microsoft. Microsoft has its hand in everything from augmented reality to cloud computing to work-from-home technology. Through the advancements in the Xbox Series X console, the company is showing that it has what it takes to succeed in the gaming vertical.

As one reviewer put it, the Xbox Series X is the “pinnacle” of gaming efforts over at Microsoft. It comes with more graphics power than before, fast game load times and a sleek design. It also has a much better resolution than earlier models, embraces next-generation solid-state drive technology, and uses both audio and visual ray-tracing.

Why does this really matter? There are two answers to this question. The first is that competition is really fierce. Microsoft continues to battle it out with longtime rival Sony, but it also faces competition from Amazon. In just the last few months, that Big Tech leader has made headlines over its investments into the gaming world, and CEO Jeff Bezos does not shy away from a chance to dominate a new vertical.

The second reason is that Microsoft has clearly been trying to expand its reach. Earlier in the summer it made a bid for the U.S. operations of TikTok, losing out to Oracle (NYSE:ORCL) and Walmart (NYSE:WMT). Although it was unclear at the time just how the short-form video platform would mesh with other Microsoft offerings, the loss was still a blow. However, some experts think that the Xbox Series X launch reaffirms the potential Microsoft has in gaming. Could this launch ease the TikTok pain and make MSFT stock investors proud?

The Bottom Line

Investors should know that both Microsoft and Sony could benefit from new console launches this week — yes there is competition, but the catalysts at hand are very powerful.

Keep a close eye on launch-day demand and how the holiday shopping season plays out. If the novel coronavirus catalyst plays out as anticipated, MSFT stock could level up.

On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Sarah Smith is a Web Content Producer for InvestorPlace.com. 


Article printed from InvestorPlace Media, https://investorplace.com/2020/11/xbox-series-x-launch-key-takeaways-for-microsoft-msft-stock-investors/.

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