After a frail period of declining PC sales, Microsoft (MSFT) had made a stunning recovery through its cloud platform Azure. Despite tight competition from the likes of Amazon (AMZN), IBM (IBM) and Google (GOOGL), Azure picked up 98% revenue growth in the most recent quarterly earnings. And now, Microsoft has big plans to utilize this platform to recapture the gaming market it lost to Sony’s (SNE) successful PlayStation series.
Microsoft’s gaming revenue improved 8% last quarter, but it had a relatively tiny impact on the overall revenue. Now, in what could be a game-changing experiment, Microsoft plans to merge its gaming and cloud platforms to form a powerful mutant resembling Netflix (NFLX) subscription model.
Instead of streaming videos, users will be able to play games on any connected device from anywhere on the planet where the service is available.
The tech major aims to reach out to 2 billion gamers around the world and has even created a new unit for cloud gaming, which will be headed by former Xbox chief Phil Spencer. The company had been apparently planning this shift for a long time; over the years, it had been on a buying spree for gaming companies, including PlayFab, a platform with more than 1,200 games.
Brace yourselves, a Microsoft cloud-gaming mutant is coming for your Playstations!
While the gaming strategy is expected to provide an excellent headstart for the company to regain its lost vigor, PC sales have also recently seen a slow resurgence. Adding to that is Microsoft’s rapid expansion plans into multiple locations on all six inhabitable continents. All this together makes Microsoft a great stock in the long term.
The fundamentals are also clean with a PE ratio of 27.5 and dividend yield of 1.87%. The stock was set for a good rally above $95, when a market correction pulled it down to its lowest level this year, at $84. And this was an ideal opportunity to get the stock.
Twenty-seven out of 34 analysts have a “Buy” rating on the stock, with a price target of $104.24. That leaves abundant space for growth given the current stock price.
If you are looking for long-term gains, this stock could be ideal for you. On the other hand, short-term traders might not find it an attractive bargain.
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