Is Microsoft a Buy, Sell, or Fairly Valued Ahead of Earnings?
We believe the combination of Azure, DBMS, Dynamics 365, and Office 365 will drive above-market growth as CIOs continue to consolidate vendors. We believe More Personal Computing will grow modestly above GDP over the next 10 years. We focus online gold trading our growth assumptions around Azure, Microsoft 365 E5 migration, and traction with the Power Platform for long-term value creation. We also see a new growth avenue emerging in the form of AI, where Microsoft is positioned as a clear leader.
- The company expects revenue and operating income to increase double digits in its 2023 fiscal year.
- Microsoft’s existing presence as the second-leading cloud platform and ties to OpenAI should translate to growth for Azure moving forward.
- Microsoft’s stock valuation has jumped in 2023, but it still isn’t as expensive as it was during the crazy-growth days in late 2021.
- But quality often doesn’t come cheap, and Microsoft’s valuation could stunt short-term investment returns if the broader market becomes more volatile.
Put another way, users can manage all cloud resources from one location, even if those resources aren’t stored in Microsoft’s cloud. That greatly reduces complexity, and it makes a strong case for why clients should choose Azure as part of their cloud strategy. Upgrade to MarketBeat All Access to add more stocks to your watchlist. You can purchase shares of Microsoft directly in a brokerage account. We believe More Personal Computing will grow modestly above gross domestic product over the next 10 years. Focus on areas including Azure growth, discussion of AI, and the impact of layoffs.
Before investing money in any company, it pays to do your research. The U.S. Securities and Exchange Commission (SEC) requires publicly traded companies like Microsoft to file information about their finances and performance on a quarterly and annual basis. You can find the Form 10-Q (quarterly reports) or Form 10-K (annual reports) on the company investor relations site. We believe that tech investors are keenly aware of Microsoft’s dominance in its software segment. In addition, the company’s leadership has also extended to Cloud SaaS. Microsoft has demonstrated that its pivot towards Cloud Computing has helped it leapfrog Salesforce (CRM), which was ahead of MSFT in 2016.
The LinkedIn acquisition was expensive but served a purpose and seems to be working out well in our view. It is not clear how much Microsoft bought in the Permira-led Informatica leveraged buyout, and it may have been an important strategic investment, but Informatica was certainly not a growth catalyst. GitHub was expensive but strategic and seems to be shaping up as a success, while the ZeniMax deal should boost the company’s first-party video game publishing efforts. We expect the Nuance acquisition to be digestible, but the recently announced Activision Blizzard acquisition is the company’s largest ever and might warrant more attention.
In March, Microsoft announced that it is adding artificial intelligence tools to its popular Office productivity applications. The Copilot feature uses next-generation AI to automate and simplify tasks and provide suggestions. In January, Microsoft announced a new investment, reportedly worth $10 billion, in artificial intelligence startup OpenAI.
- It’s packed with all of the company’s key stats and salient decision making information.
- The partnership allowed Microsoft to introduce AI upgrades across its product lineup, including its Office suite, Azure, and Bing.
- Despite serious efforts, Microsoft has failed to gain a foothold in the mobile operating system market.
- Microsoft’s success has catapulted its stock by over 320,000% since it went public in March 1986.
Some of the most deeply discounted growth stocks can be found in the marijuana industry, which is why U.S. multi-state operator (MSO) Jushi Holdings (JUSHF -2.34%) makes for a smart buy with $20. More importantly, Exelixis’ lead drug is being examined in close to six dozen clinical trials as a monotherapy or combination treatment. If even a handful of these trials yield a positive result, label-expansion opportunities and organic growth could send Cabometyx to north of $2 billion in peak annual sales. Microsoft earned $2.69 a share on sales of $56.2 billion in the quarter ended June 30. Analysts polled by FactSet had expected Microsoft earnings of $2.55 a share on sales of $55.5 billion. On a year-over-year basis, Microsoft earnings rose 21% while sales climbed 8%.
But technology stocks quickly bounced back, and led the index 24% higher by end the year. Before selling any shares, though, make sure you consider capital gains taxes. If stock prices have gone up since you invested your money, you’ll be taxed on your profits, unless you’re investing in a tax-advantaged account. If you want to minimize the amount you may owe, consult with a tax professional. However, Microsoft is a very profitable business with deep pockets and a strong competitive position in several industries.
Price Target and Rating
It’s also significantly more expensive than the S&P 500, which sports a PE ratio of about 25. Questions about the economy’s stability, rising interest rates, plus the market becoming expensive make many investors question if there are better stocks out there. With Microsoft making up nearly 10% of the Nasdaq-100 and just under 7% of the S&P 500, it’s an excellent bellwether stock for determining how far the markets have left to run.
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After the P/E ratio, it’s one of the most common valuation metrics. The ever popular one-page Snapshot reports are generated for virtually every single Zacks Ranked stock. It’s packed with all of the company’s key stats and salient decision making information. Including the Zacks Rank, Zacks Industry Rank, Style Scores, the Price, Consensus & Surprise chart, graphical estimate analysis and how a stocks stacks up to its peers.
You have more leeway if you’re a long-term investor with plans to hold your shares for at least five years. High market share in the client-server architecture over the last 30 years means significant high-margin revenue is at risk, particularly in OS, Office, and Server. The 1 week price change reflects the collective buying and selling sentiment over the short-term. A strong weekly advance (especially when accompanied by increased volume) is a sought after metric for putting potential momentum stocks onto one’s radar. Others will look for a pullback on the week as a good entry point, assuming the longer-term price changes (4 week, 12 weeks, etc.) are strong.
Microsoft Stock Jumps On Office AI Pricing
Projected EPS Growth looks at the estimated growth rate for one year. It takes the consensus estimate for the current fiscal year (F1) divided by the EPS for the last completed fiscal year (F0) (actual if reported, the consensus if not). The Price to Cash Flow ratio or P/CF is price divided by its cash flow per share. It’s another great way to determine whether a company is undervalued or overvalued with the denominator being cash flow.
The company also continues to benefit from increased adoption of its cloud-based Office 365 offering. Office Commercial products and cloud services revenue grew by 13% in the past year, while the same for the consumer users saw an increase of 10%. With the prospect of higher interest rates on the cards, will we continue to see the rotation continue in 2022, or is it a case of déjà vu all over again? After all, we have been here before; the current market sentiment is very reminiscent to the start of 2021. The tech-heavy Nasdaq Composite Index fell by as much as 11% between mid-February and the first week of March last year.
Microsoft’s Cloud Computing Business is Highly Formidable
This is also useful to know when comparing a stock’s daily volume (which can be found on a ticker’s hover-quote) to that of its average volume. A rising stock on above average volume is typically a bullish sign whereas a declining stock on above average volume is typically bearish. While the hover-quote on Zacks.com, as well as the various tables, displays the delayed intraday quote and price change, this display shows the daily change as of the most recently completed trading day.
This includes advancing internally developed compounds into phase 1 studies, as well as signing collaboration agreements to potentially expand its cancer-drug pipeline. Last week, Exelixis announced its third-quarter operating best oil stock results, which failed to hit the mark and sent its shares down by more than 10%. Sales of lead-drug Cabometyx were shy of Wall Street’s expectations, which caused Exelixis to lower the upper end of its full-year sales outlook.
While they’ll inevitably buy while prices are high, they’ll also buy when prices are low, averaging out the risk faced in the market. In terms of valuation, Microsoft trades at 12 times sales and 36 times earnings. Both of those figures are at the high end of their historical ranges.
Microsoft has gained significant traction over the past five years, and it has become the leading Cloud SaaS player in the market with a share of 16.8% (as of H1’21). As seen above, it’s also well ahead of Salesforce, whose share dropped from 14.4% in H1’19 to 10.5% How to trade litecoin in H1’21. The investing information provided on this page is for educational purposes only. NerdWallet, Inc. does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.