Microsoft's (MSFT) gaming segment should not be brushed off by forward-thinking investors.
The company is no stranger to gaming, having been the creator of the Xbox and spearheading online gaming for years. However, with the growth in competitive gaming and gaming overall, the demand for cloud platforms on which to play should only increase in importance moving forward.
"We reiterate that gaming is becoming an increasingly important part of our thesis as the company takes advantage of the growing mainstream adoption by making it easier than ever to gain access thanks to the Xbox All Access pass," Jim Cramer's Action Alerts PLUS portfolio wrote on Friday. "This initiative stands to reduce the upfront cost of a system and increase the company's recurring revenue stream, something that is generally more highly valued by investors."
The team has a "One" rating for the stock, signifying a strong buying opportunity.
Microsoft is currently the third biggest cloud gaming company by revenue, behind only Sony (SNE) and Tencent (TCTZF) and saw the segment grow a remarkable 14% in the last quarter, marking $1.3 billion in extra revenue.
The company could further gain ground on its Chinese and Japanese contemporaries soon, as its acquisition of PlayFab, back-end platform provider of services to build, launch and grow cloud-connected games, has helped accelerate growth in the segment.
Ivan Feinseth, CIO of Tigress Financial Partners, told Real Money that larger scale factors will help grow the segment as well.
"Microsoft is still one of the largest gaming companies in the world," he explained. "If you look at the growth, people are filling up arenas just to watch gaming."
Feinseth said the growth of gaming toward a sports environment should only increase opportunity for an established cloud gaming company like Microsoft.
Similar to the Action Alerts PLUS team, he posted a buy rating for the stock.
While the $10.3 billion in revenue garnered from the company's gaming segment in fiscal year 2018 is not an overwhelming percentage of the company's overall $110.4 billion in revenue, the accelerated growth rate makes it an important segment for investors to be mindful of.
Given the bullish outlook of both Jim Cramer's team and Feinseth, investors would be wise to listen about the future of this consistent growth engine during the company's earnings on Oct. 24.