Morgan Stanley released a note on Tuesday, June 12, stating that Microsoft has a "solid start in the game-streaming service."
Microsoft announced ahead of E3 that its working on a cloud streaming service, which is being called Game Pass.
The cloud streaming service has been acknowledged as a $100 billion opportunity for Microsoft.
"The race going forward involves building compelling content libraries, attracting large subscription bases and building the capability to stream games to a broad set of devices - including consoles, PC's and mobile phones," said the note.
Morgan Stanley has Microsoft's stock rating as overweight, but believes that the industry view is attractive.
Analysts discussed more Game Pass details that make the cloud service attractive. At its E3 presentation, Microsoft announced "new content coming to [its] subscription-based gaming service, including new first-party games like Forza Horizon 4 being available on Game Pass the same day as general."
The company is also "working on building a 'console quality' streaming service able to stream content to every device, significantly opening the potential user base."
The company's focus on Game Pass and cloud streaming help Microsoft build the "framework for a $1 trillion market cap."
Morgan Stanley has a price target of $130 per share. Microsoft currently trades for around $100.
KeyBanc published a note on Microsoft's E3 presentation and its streaming services on Monday, June 11.
Analysts said, "[Microsoft] continued to be bullish at the prospect of using Azure for business workloads from 9 to 5 and then trading off to consumer workloads such as gaming, which could be very synergistic for utilization of Azure...The company also called out its focus on creating developer-led vision for attracting new content to be developed first on Xbox to drive third-party releases on the platform."
Azure, which is mentioned above, is Microsoft's cloud computing service. It would be utilized when developing a cloud video-game streaming service.
"As Xbox pursues a more aggressive push toward streaming and subscription, the value of first-party content breadth increases on several levels," said the note.
The analysts also said, "With the announcement of Forza Hoprizon 4 and Fallout 4 coming to Game Pass, the company is doubling down on its subscription strategy. [Tim] Stuart [CFO of Xbox] commented that Game Pass has continued to outpace internal targets."
In a note released by Keybanc on June 4, analysts stated their "bull-case scenario analysis suggests gaming could sustain double-digit growth over the next five years on increasing subscription and software attach-rates with overall revenue increasing to $15 billion by [fiscal year 2023] vs. $8 billion in [fiscal year 2017]."
In afternoon trading Tuesday, Microsoft was up slightly to $101.17.