Stock Analysis & Ideas

Microsoft Stock: Best Metaverse Play?

Shares of long-time tech titan Microsoft (MSFT) may actually be one of the frontrunners to bring the metaverse into the mainstream.

Indeed, the concept of the metaverse remains abstract for many, especially non-gamers. Meta Platforms (FB) has an ambitious vision for the future of the metaverse, but it probably will not be the only firm to flex its muscles in the digital worlds of the future.

Arguably, Microsoft could face a smoother transition into the metaverse when the time comes, given its incredible video-game business (a major appeal of the metaverse), and its other intriguing innovations targeted at work.

It’s hard to get into enterprise software as a consumer company. We’ve seen such over many years. Apple (AAPL) hasn’t been able to make noise in the enterprise space despite its dominance on the consumer side.

With Microsoft Teams, Office, Windows and a wide range of product offerings commonplace in workplaces, it will be hard to dethrone the firm, even as we transition into a metaverse that’s ready for workplace prime time. I am bullish on MSFT stock.

Metaverse: Work or Play?

Gaming is likely to be synomous with the metaverse, at least initially. On both the work and play fronts, Microsoft is a force to be reckoned with, given its video gaming and enterprise software dominance.

While the HoloLens mixed-reality headset isn’t yet a hit, I do think investors cannot ignore Microsoft’s intentions with the metaverse. Further, future iterations of its HoloLens or similar product could be met with success once the world is finally ready for the metaverse.

Even if Microsoft’s hardware doesn’t sell, it has software on its side. In terms of software aimed at work and play, it’s really hard to stack up against the company, which seems to be improving its metaverse prospects by the day.

Microsoft’s Activision Blizzard Deal

Undoubtedly, the acquisition of Activision Blizzard (ATVI) makes an already strong Xbox segment that much stronger. The deal brings forth blockbuster brands, including World of Warcraft, Overwatch, Diablo, Call of Duty, and Candy Crush. There’s no question that the massive size of the deal will leave Microsoft subject to regulatory reviews.

A behemoth scooping up a relative behemoth in the gaming industry? Seems like a deal destined to fall through, right? Not so fast. Microsoft intends to not pull Activision Blizzard titles from other video-game consoles.

If it lives up to such promises or is forced to implement other moves to appease anti-trust regulators, I do think Microsoft will sign the dotted line with its biggest video-game acquisition to date.

Blockbuster titles and robust IP could be what makes gamers justify the purchase of a hardware device. Just how much will consumers be willing to pay? That’s the million-dollar question.

For now, the metaverse is likely to be a niche product aimed at gamers. In due time, casual gamers will get interested, and employees will encourage their workplace to invest in VR or AR headsets for digital workplace environments.

Indeed, the metaverse potential is enormous, but don’t go out and load up on digital real estate in the metaverse just yet, as it could be a slow and steady onramp into the metaverse.

Further, we don’t yet know if augmented reality will come before fully virtual worlds. I think AR is a stepping stone that leads to VR. In any case, Microsoft is very well positioned to continue defying its old age with new growth pathways.

Wall Street’s Take

According to TipRanks, MSFT stock comes in as a Strong Buy. Out of 29 analyst ratings, there are 29 Buy recommendations.

The average Microsoft price target is $375.22, implying an upside of 27.4%. Analyst price targets range from a low of $320 per share to a high of $425 per share.

Bottom Line on Microsoft Stock

Microsoft still has its innovative edge, and investors should look no further than the name for premium metaverse exposure.

Best of all, if the metaverse isn’t yet ready for another 10+ years, MSFT stock is unlikely to fold considerably versus the likes of Meta Platforms, which depends on ads.

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