Microsoft (Ticker Symbol: MSFTWealth Strength IndexMSFT is Moderately Up and trending Up) and Advanced Micro Devices (Ticker Symbol: AMD) both traded to all-time highs today on the announcement that Microsoft will be releasing a new gaming console in 2020, and will be using chips from Advanced Micro Devices to help power the console. The next generation console from Xbox, which the company is referring to as, “Project Scarlett,” will be released to consumers during the 2020 holiday season. Microsoft is using Advanced Micro Devices chips that will enable the console to be four times faster than the Xbox One X console. The new console will use a solid-state drive and will feature a frame rate of up to 120 frames per second, which is two times more than the average TV, enabling games to load much faster.
The new console will have 8K resolution and will have cloud streaming capabilities. To coincide with the launch, Microsoft will be releasing the newest version of its most popular game, “Halo,” which will be released near the same time as the console. Microsoft also announced 14 new additional games that it will be producing for the release in the near future including the popular shooting game, “Gears 5.” In October, Microsoft will be previewing its new streaming game service called, “ProjectXCloud.” The company stated that the new service will be designed to work across PCs, consoles, and mobile devices.
Microsoft’s stock started off to 2018 to a good start. The stock made a series of higher lows over the first two quarters while trading in an ascending triangle chart pattern. Throughout that pattern, Microsoft found price support multiple times at its 100-day Moving Average. The stock broke out of its triangle to the upside, proceeding to rally over 20%. The stock then peaked and began to give back the majority of its move in the fourth quarter of 2018.
Microsoft’s stock had a mediocre performance to start the year in 2019. The stock broke through its 2018 downtrend in the first quarter, led by a positive earnings and guidance report. The stock continued to rally just under 20% before pulling back and finding support just above its 100-day Moving Average. The stock recently has been on a tear, rallying over 10% and advancing to an all-time high of $134.08 on Monday morning after the opening bell.
(Chart above courtesy of www.tipranks.com)
Based on a survey of 25 analysts offering 12-month price targets, the average price target for Microsoft’s stock is $142.83. According to that number, the stock is priced at a premium relative to Wall Street’s analysts and could be considered overvalued around current levels near $132.61.
Microsoft’s is positioned well to capitalize on the cloud gaming services due to the content it owns, strength in infrastructure and experience in gaming. The company’s competitor, Google, began taking early orders for Stadia, its game-streaming service that it which will launch in November. Investors in Microsoft should look to their next earnings release on July 21, 2019 for fresh news within the company.