Morgan Stanley Analysts Reiterate $245 Price Target, See Promising Future in Microsoft’s Gaming Business
October 10, 2020 | technology | No Comments
On Thursday, Morgan Stanley analysts reiterated their Overweight rating on Microsoft (MSFT) with a $245 price target. The analysts see great upside for Microsoft ahead of new Xbox console launches and following the $7.5B acquisition of game developer and publisher Bethesda Softworks.
The long-awaited release of the Xbox Series X/S console is approaching quickly. As expected, Microsoft should experience an uptick in hardware sales driven by the increase of “work/stay/play at home” activities from consumers. “The increase in gaming hardware revenue in FY21 vs.FY20 of $779 million in our model is already pressuring our existing FY21 gross margin estimates by ~35bps”, stated by Morgan Stanley analysts.
The analysts further noted: “Microsoft’s revenue base has grown meaningfully since (MSe $156 billion revenue in FY21 vs $110 billion in FY18), thus making the margin dilutive effect less meaningful now, in our view. Despite this modest gross margin headwind, we look for FY21