Microsoft vs Sony Stock: Which Is Best?

Microsoft Corporation (NASDAQ:MSFT) and Sony Corp (NYSE:SNE) are engaged in the hottest battle of the summer.

The next-gen console wars are finally upon us, making the Sony PlayStation 5 and Microsoft Xbox Series S and X the most-wanted gifts of the 2020 holiday season. Regardless of which console is the best, savvy investors want to know about Microsoft vs Sony stock.

Both companies rebounded from sharp dips in Q1 2020 to reach record-high market capitalizations. Their share prices already reflect the anticipation for next generation product sales; both consoles are selling out within their first week of release.

However, the numbers may not be as impressive as you think, thanks largely to the COVID-19 pandemic. Not only did it temporarily shut down manufacturing, but it also shuttered E3, the summer’s biggest gaming event traditionally led by press conferences from the big three console makers.

Plus, gaming is just one avenue where these tech giants compete against each other.

Microsoft Stock Winning From SaaS Pivot

Microsoft entered the video game console market with its original Xbox system on November 15, 2001, along with its paid online subscription service, Xbox Live. Because of its experience in PCs, the Xbox bridged the gap between traditional consoles and home computers.

It soon became a major player in the console wars, and has rivaled Sony (SNE) and Nintendo ever since.

This is because Xbox Live was just one part of Microsoft’s overall shift to a software-as-a-service (SaaS) subscription model.

In gaming alone, it also Xbox Game Pass for PC, which mines the company’s Xbox, 360, and One libraries to compete with Google’s Stadia and Nvidia’s GeForce Now services.

The Series S costs $299 and the Series X costing $499. It’s also offering consoles through its Xbox All Access financing program and is estimated to have sold 1 million units on launch day, which included pre-orders.

Microsoft also spent $7.5 billion in September to buy Bethesda, maker of games like Fallout, Quake, Wolfenstein, Doom, and The Elder Scrolls. This is a sign the company is serious about staying in the race for gaming dominance. But Sony’s not letting up either.

Sony Has Over 100,000,000 Monthly Active Users

Sony launched its original PlayStation console on December 3, 1994. Originally meant as a CD add-on for Nintendo’s SNES to compete with Sega CD, the console was eventually released as a standalone and quickly changed the gaming landscape. By the time the PlayStation 4 launched, Sony was a clear leader in console gaming.

Unlike Microsoft, Sony also dove into mobile gaming with its Vita and PSP devices, and it makes smartphones. This helped build the console into an entertainment ecosystem that even includes exclusive movie and TV content from Sony’s wide content funnel.

The company has over 45 million PlayStation Plus subscribers with 113 million monthly active users on its PlayStation Network. With cross platform engagement becoming more common across devices, it’s unclear how important gaming consoles will remain.

Sony’s PSVR and exclusive titles like Marvel’s Spider-Man: Miles Morales give the company a slight edge over Microsoft’s, and it’s been subsequently outselling it with both the PS4 and PS5 so far.

However, the skies aren’t clear ahead, as the company faces several obstacles in its way, including the competition listed above, and Facebook’s Oculus Quest 2.

What Could Derail Microsoft Stock?

Microsoft was once the biggest player in home computers and video games, but those days are gone, and it slowly lost its market share within the gaming community.

Just like Apple (AAPL) and Google (GOOG) deteriorated its OS market, Sony and Nintendo brutalized the company.

Heading into this console generation, Sony’s PlayStation 4 is the best-selling console, with 113.3 million units sold from 2013 through 2020, versus 48.27 million total Xbox One consoles in the same period. Meanwhile, the Nintendo Switch sold 64.34 million units since its launch in 2017

And the Switch easily outperformed both companies combined by nearly twice as many 2020 sales, due to anticipation over the latest consoles.

With the PS5 already dominating, it’s unclear how Microsoft will fare this generation, even in opening its gaming library to PC gamers.

That library does include some heavy hitters though, like Minecraft, Halo, and now Fallout games included under the Microsoft umbrella.

Dangers Of Investing in Sony

Sony’s lead in the console wars can easily be taken by Nintendo, which has plenty of tricks left up its sleeve to introduce new Switch models. In fact, the company’s all-time best-selling game system is the PS2, with 157.7 million units sold.

The biggest revenue driver from Sony’s gaming division are the in-house games and subscribers who pay monthly fees to access online content. However, Stadia and others are competing with Sony’s PlayStation Now subscription service.

Should either Alphabet (GOOGL) or Nvidia (NVDA) (or even Apple, Facebook, or Amazon) get their acts together, they could limit Sony’s potential gaming progress.

Sony Vs Microsoft Stock: The Bottom Line

Sony and Microsoft are front and center in the 2020 holiday season thanks to the launch of their latest consoles, which are sure to be on everyone’s minds for the rest of a tumultuous year. Each has a different strategy to maintain their respective leads, giving investors two possibilities to invest over the holidays.

While sales numbers are impressive, manufacturing delays caused by the coronavirus and limited marketing caused by the pause on live esports and gaming events could slow the growth of both consoles. There’s a good chance Nintendo and Oculus are accelerating their efforts to get gamers’ money for Christmas gifts.

Gaming is just one aspect of each company’s revenue drivers. Microsoft in particular has a multi-pronged revenue strategy that attacks Google on Search, Slack with Microsoft Teams, Amazon with its cloud offerings, and so on. For investors who want diversification and a cash rich company, MSFT stock is the better bet.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.