Tuesday, May 21, 2013

Will next Xbox super machine boost Microsoft?

Within a few hours of this time of writing Microsoft (MSFT:$35.08) will reveal its new xbox console that will heral the eight generation of console gaming, rumored to be available by the end of this year (For more info check out #xboxreveal twitter). Sony (SNE:$20.97) announced earlier this year its new Playstation 4 console, and Nintendo (NTDOY:$13.64) already made its platform available to the public last holiday season with its Nintendo Wii U. The buzz in video game land about the xbox has been leading up to this moment when it comes to the xbox; speculations about its name Xbox Infinity, Xbox 720 and compatibility etc, but what will this mean for Microsoft's stock price? And where will it leave the less innovative Nintendo when Sony and Microsoft will duke it out on the highly competitive billion dollar video game industry battlefield?


Combine the recent bull run on wall street with the hype around what I like to call 'Bill's new Box' (although Bill doesn't really have to do with it all that much, we'll keep it a tradition), console that will be announced today at 10 am PST, mix it together and you will get a chart that will look like the one below:


For quite some time Microsoft's stock has been hovering around the $20 range and has broken the $30 mark since the second half of April this year, but is Microsoft's stock overbought? - the RSI certainly implies it, but I think Microsoft is on to something here. It took awhile, but it looks like Microsoft has finally cleaned up its act a bit and realizes that developing accessible and faster software can actually make a profit (how about that!) I have to be honest though, I've been pretty bearish on Microsoft lately, but things have started to change and Microsoft has proven that it can be a major player in its highly competitive industry. A major player that continues to innovate for example when it comes to the video game industry; when a few years ago sales slowed down for the Xbox360 it introduced an amazing add-on feature called the Kinect with innovative technology that has never really been seen before. Also the online gaming experience and also teaming up with major partners such as Netflix etc is a great move by them.

For the reasons mentioned above I see that Microsoft has huge potential, despite the competition. I foresee a major run on the next xbox which, from experience with the launch of any game console, will happen gradually - but it will happen, and when that time comes it will be well trading around in the $45 - $50 range, that's why Microsoft's current stock price is a bargain. A pullback to $32 can happen as soon as the rally is over but if you can buy this stock anywhere in this range I think you're set.

The same goes for Sony with its Playstation 4, is also here to stay for awhile thanks to the new eight generation console war, will probably also see a boost in its stock price, but that's a maybe since I've not really analyzed Sony's stock price.

Nintendo is a sad story. Its Wii U finally caught up with the graphics of the Xbox360 and Playstation 4 (these two are ready to take it to the next level), and comes also with a touch screen tablet pad, but it is simply not innovative enough to compete with the two other major players mentioned above. There's a reason why Nintendo's stock plummeted in the last 2 years, even with their new Wii U, Nintendo sees its stock price dwindling down almost every month.

So in a nutshell: short term stock trades: MSFT, SNE,  NTDOY

Disclaimer:

All opinions expressed, trade recommendations/advice on this website are solely of John van der Munnik and are not affiliated with any investment firm or any other organization. You should not make an investment only based using this website VDM Trading for your trading needs without seeking help from your own financial advisor.