Stock Guy777
1 month ago
Undervalued by 21%, This Stock to Own Forever Is a Buy
This wide-moat stock can serve as a core holding for any investor.Microsoft https://www.morningstar.com/stocks/xnas/msft/quote may very well be one of those stocks to buy and hold forever. Known for its Windows operating system and Office productivity suite, Microsoft continues to widen its economic moat with a broad portfolio that now spans productivity and business processes, intelligent cloud, and personal computing. Today, its moat has not just one but three sources (cost advantage, network effect, and switching costs), which is more than many wide-moat companies can say. Management has done an outstanding job of allocating capital, and we have confidence in CEO Satya Nadella’s strategic vision to carry Microsoft forward. The best news for investors: The stock is a buy, trading 21% below our $490 fair value estimate. Microsoft appears on Morningstar analysts’ list of https://apple.news/AOXbF1KoqTMGip_iNsD5Wow this quarter. It’s also among Morningstar chief US market strategist Dave Sekera’s https://apple.news/AzDR0xG4fT5mBc8k1B9gFfQ.Microsoft is now a more focused company that offers impressive revenue growth with high and expanding margins and deepening ties with customers. We believe that Azure is the centerpiece of the new Microsoft. Even though we estimate it is already an approximately $75 billion business, it grew at an impressive 30% rate in fiscal 2024. Microsoft is also shifting its traditional on-premises products to become cloud-based solutions. Critical applications include LinkedIn, Office 365, Dynamics 365, and the Power Platform, with these moves now beyond the halfway point and no longer a financial drag. The company is pushing its gaming business increasingly toward recurring revenue and residing in the cloud as well. Thanks to its investment in OpenAI, Microsoft has also emerged as a leader in artificial intelligence.Key Morningstar Metrics for Microsoft•https://www.morningstar.com/investing-definitions/fair-value-estimate-: $490•https://www.morningstar.com/investing-definitions/morningstar-rating-for-stocks-: 4 Stars•https://www.morningstar.com/investing-definitions/morningstar-economic-moat-rating: Wide•https://www.morningstar.com/investing-definitions/uncertainty-rating: MediumEconomic Moat RatingFor Microsoft overall, we assign a wide economic moat, arising primarily from switching costs, with network effects and cost advantages as secondary moat sources. We believe the productivity and business processes segment and intelligent cloud segment have earned wide moats, and the more personal computing unit warrants a narrow moat. We believe Microsoft is likely to earn returns in excess of its cost of capital over the next 20 years. The more critical the function and the more touch points across an organization a software vendor has, the higher the switching costs. There is also the direct time and expense of implementing a new software package for the customer while maintaining the existing platform and retraining employees on a new system. Additionally, there is operational risk in changing software vendors.Fair Value Estimate for Microsoft StockOur $490 fair value estimate implies a fiscal 2025 enterprise value/sales multiple of 13 times and an adjusted price/earnings multiple of 38 times. We model a five-year revenue compound annual growth rate of approximately 13% including the Activision acquisition. We envision stronger revenue growth ahead as Microsoft had been bogged down by the 2008 downturn, the disposal of the Nokia handset business, and the onset of the model transition to subscriptions. However, we believe macro and currency factors will pressure revenue in the near term. We model operating margin increasing from 45% in fiscal 2024 to 46% in fiscal 2029, driven by improvements in gross margin as Azure continues to scale as well as some operating leverage. We expect some interim pressure on gross and operating margin in fiscal 2025 from an accounting change, Activision pressure, and investment in Azure capacity.Risk and UncertaintyMicrosoft’s high market share in client-server architecture over the last 30 years means that significant high-margin revenue is at risk. The company must continue to drive revenue growth of cloud-based products faster than revenue declines in on-premises products. Microsoft is acquisitive, and while many small deals fly under the radar, it has had several high-profile flops, including Nokia and aQuantive. The public cloud buildout is in its early phases. Amazon Web Services has taken the market by storm, with Azure trailing. In this rapidly evolving market, Microsoft must continually adjust its offerings and compete with a company that has built a business around aggressive pricing.Microsoft Bulls Say•Public cloud is widely considered to be the future of enterprise computing. Azure is a leading service that benefits from the evolution first to hybrid environments and then to public cloud environments.•Microsoft 365 benefits from upselling into higher-priced products as customers are willing to pay up for better security and Teams Phone; this should continue over the next several years.•Microsoft has monopoly-like positions in various areas (Windows, Office) that serve as cash cows to help drive Azure growth.Microsoft Bears Say•The ongoing shift to subscriptions in slowing, particularly in Office, which is generally considered a mature product.•Microsoft lacks a meaningful mobile presence.•Microsoft is not the top player in its key sources of growth, notably Azure and Dynamics 365.This article was compiled by Susan Dziubinski and Sylvia Hauser. Data as of April 16, 2025.
DiscoverGold
1 month ago
Big Money Dumping Microsoft Could Benefit Long-Term Investors
By: Lucas Downey | April 11, 2025
🔸 Forced selling drives shares of Microsoft Corporation (MSFT) to fall.
MSFT is a household name in technology. It develops and supports software, services, devices, and solutions for businesses and individuals around the world. Its cloud and AI businesses could produce another several years of success after decades of growth.
But like many other stocks, MSFT has gone through a bad period of forced selling recently. Each red bar in the chart below signals unusually large volumes in MSFT shares. They reflect our proprietary Big Money outflow signal, pushing the stock lower:
It’s no wonder MSFT shares are down 10% this year. MAPsignals data shows how Big Money investors are shedding this quality name.
Time to Buy Microsoft?
When best-of-breed stocks are sold hard, history shows it’s often a buying opportunity for long-term investors. Institutional volumes reveal plenty. Each red bar below signals unusually large outflow volumes in MSFT shares:
Source: www.mapsignals.com
Look at the stretch in 2022 – red bars for nearly a year. Capitulation was in full effect and share values fell. But those who bought during that time have profited handsomely since, even with the latest dips.
See, despite the near-term volatility, there’s a powerful fundamental story happening with Microsoft.
Microsoft Fundamental Analysis
A healthy fundamental backdrop makes this company worth investigating. As you can see, MSFT has had strong sales and earnings growth, as well as healthy profits:
🔸 3-year sales growth rate (+13.5%)
🔸 3-year EPS growth rate (+13.9%)
🔸 Profit margin (+36%)
Source: FactSet
Also, EPS is estimated to ramp higher this year by +13.4%.
MSFT has a track record of strong financial performance.
Marrying great fundamentals with our proprietary software has found some big winning stocks over the long term.
Microsoft has been a top-rated stock at MAPsignals. That means the stock has unusual buy pressure and growing fundamentals. We have a ranking process that showcases stocks like this on a weekly basis.
It’s made the rare Top 20 report multiple times in the last decade. The blue bars below show when MSFT was a top pick…sending shares upward:
Source: www.mapsignals.com
Look at all those Top 20 signals and look how much share values have grown. Even those who bought before the 2022 decline have gained. And those brave enough to buy when the stock was down, like in 2022, were rewarded even more.
Tracking unusual volumes reveals the power of money flows.
This is a trait that most outlier stocks exhibit…the best of the best. Big Money demand drives stocks upward.
Microsoft Price Prediction
Given the fundamentals, it wouldn’t surprise to see the stock rise once again with Big Money support. Great companies don’t stay down forever.
Big Money selling in the shares is signaling to take notice. Given the historical gains, strong fundamentals, and recent big selling, this stock could be worth a spot in a diversified portfolio.
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DiscoverGold
DiscoverGold
1 month ago
Microsoft (MSFT) Stock Weakens as Bullish Case Gets Cloudy
By: Schaeffer's Investment Research | April 10, 2025
🔸 Wedbush lowered its price target on MSFT to $475 from $550
🔸 The stock helped lead yesterday's tech rally
Microsoft Corp (NASDAQ:MSFT) stock is taking a breather after a massive 10% rally on Wednesday. The tech heavyweight was last seen 1.6% lower premarket, following a cautious note from Wedbush, who lowered his price target on MSFT to $475 from $550, while maintaining its "outperform" rating. The firm cited rising tariff-related uncertainty, stating that the escalating “game of poker” between the U.S. and China presents near-term risks for companies with global supply chains -- including Microsoft.
MSFT’s sharp rebound yesterday snapped a five-day losing streak and is now facing off with the 50-day moving average. The bounce comes after the stock hit a low of $344.79 on Monday -- its lowest level since November 2023. Despite the recovery, MSFT remains down 7.4% year to date and continues to face technical resistance from several key moving averages.
Wall Street remains overwhelmingly bullish on Microsoft stock, with 43 of 46 analysts maintaining a “buy” or better rating on the stock. However, the optimism may be overextended, as the average 12-month price target of $498.01 represents a 29.5% premium to Wednesday’s close. This suggests that expectations could be due for a reset, if macro uncertainty continues to weigh on the tech sector.
With MSFT’s Schaeffer’s Volatility Scorecard (SVS) at just 27 out of 100, the stock has tended to underperform the volatility priced into its options. This low reading makes the security a compelling candidate for premium-selling strategies, particularly for traders expecting muted movement in the near term.
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DiscoverGold
DiscoverGold
2 months ago
Microsoft, turning 50, dials up Copilot actions to stay in AI game
By: Reuters | April 4, 2025
Thousands of people swooned in a dark conference hall that felt more like a rock concert when a Microsoft (NASDAQ:MSFT) product manager demonstrated the company’s latest feature: how to sum numbers in Excel, with the click of a button.
"It was literally like Mick Jagger walked out," said Yusuf Mehdi, Microsoft’s consumer chief marketing officer, who started as an intern.
That was more than 30 years ago. On Friday, the day Microsoft turned 50, the company’s leaders and staff gathered at its headquarters in Redmond, Washington, to remember the software maker’s glory days while trumpeting what they hope will bring it into the future: more powerful artificial intelligence.
Copilot, Microsoft’s AI assistant, is gaining a host of new features to make it more proactive. The version for consumers will start remembering personal facts about them. It will offer birthday reminders or support ahead of a presentation, or consumers can opt out, Mehdi said in an interview.
Copilot likewise will personalize podcasts and shopping recommendations, and it will let consumers task their AI to book events for them, or send a friend a gift while checking in for guidance. "It frees you up," said Mehdi.
Microsoft is hardly first to roll out action-taking or "agentic" software. As with rival systems, the AI will work best on popular sites where Microsoft has done some behind-the-scenes technical work, like with 1-800-Flowers.com and OpenTable, Mehdi said.
Mehdi recalled days when Microsoft was smaller and growing. He said CEO Bill Gates could devour three books’ worth of information from one day to the next, at a time when the co-founder still worked on Microsoft software. Mehdi watched Steve Ballmer, Gates’ eventual successor, chant "developers, developers, developers!" in a sweat-drenched shirt to rouse a crowd into the ".net" era.
Microsoft went from top of the pack to badly bruised in a high-profile lawsuit that U.S. antitrust enforcers brought against it in 1998. Years later, younger companies and startups, among them Alphabet (NASDAQ:GOOGL) and ChatGPT creator OpenAI, beat it to the punch on key AI developments.
Satya Nadella, Microsoft’s current CEO, is not standing still. The leader who turned Microsoft into the No. 2 cloud powerhouse challenged his executives at an internal summit this week, recalled Mehdi: "How do we rethink the way that we build the software?"
Nadella voiced a similar point at Microsoft’s Redmond event on Friday, where he, Gates and Ballmer made a rare public appearance. Ballmer reprised his "developers!" chant as well.
Nadella said the company was not simply celebrating its past 50 years. "Our future will not be defined by what we have built, but what we empower others to build," he said.
Gates added: "We’re on the verge of something even more profound than what came for those first 50 years."
Microsoft is iterating on its chatbot technology in a crowded field that includes Elon Musk’s xAI and Anthropic. It has added Copilot to its heavily used productivity suites for business while giving consumers a distinctive version.
"It’s warm; it has that personality," said Mehdi. Some users have taken to this, while others find it asks too many questions, he said.
"When we get to now be more personalized, we can start to get smarter," Mehdi said. "We’re part way through that journey."
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DiscoverGold
DiscoverGold
2 months ago
$MSFT - After closing decisively below the 100 week MA, a bear market is confirmed...
By: CyclesFan | March 30, 2025
• $MSFT - After closing decisively below the 100 week MA, a bear market is confirmed. The minimal target is a test of the 2021 high at 350, but it could decline all the way to the 200 week MA that's currently at 334, which isn't much lower. It's only 11% lower than Friday's close.
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DiscoverGold
DiscoverGold
2 months ago
MSFT Microsoft just slipped into a Stage 4 decline on the Weinstein Indicator...
By: TrendSpider | March 30, 2025
• Microsoft just slipped into a Stage 4 decline on the Weinstein Indicator, breaking below key support as relative performance craters, now lagging over 80% of the S&P. While earnings remain strong, the canceled data center projects and falling RP tell a different story. With the 30-week SMA curling lower and downtrend momentum accelerating, MSFT shifted from leader to liability.
DiscoverGold
DiscoverGold
2 months ago
$MSFT - Technically, it closed the week below the 100 week MA, but only barely and with a green candle that indicates that next week is likely to be an up week...
By: CyclesFan | March 16, 2025
• $MSFT - Technically, it closed the week below the 100 week MA, but only barely and with a green candle that indicates that next week is likely to be an up week, so I'm not calling for it being in a bear market just yet. If it closes below the 100 WMA next week, that will change.
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