Should You Choose Microsofts Stock?

Yet even more impressive than these gains is the manner in which Nadella has positioned Microsoft to compete and win in a mobile- and cloud-based world. After all, Microsoft makes up 6.7% of the S&P 500 and 9.7% of the Nasdaq 100, so many investors are already highly exposed to Microsoft through a basic index fund. The experts on Wall Street understand and appreciate Nvidia’s dominance as an AI GPU supplier. They’re not losing sleep if Nvidia has to face some potential competition in this field. So, we’re standing by our confident outlook on NVDA stock and assigning it a well-deserved “A” grade.

• Microsoft isn’t in danger as an investment, but there are better opportunities out there that are growing faster and can be purchased at a lower price.
• Earnings per share (EPS) rose 21% in Q1, and Wall Street analysts project 13% growth in fiscal year 2024.
• What does this mean for investors who missed out on Microsoft’s current rally?
• Oracle-Cohere’s generative AI differs from the Microsoft-OpenAI partnership in that it also offers sentiment analysis which also determines feelings and opinions behind the text.

We focus 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. We’re lifting our fair value estimate for Microsoft stock to $360 per share, and continue to view the shares as attractive.

The cloud computing and software giant has delivered stellar gains so far in 2023. Could this be just the beginning?

Its management is world-class, its products are legendary, and its revenue streams are diverse and growing. Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Its suite of productivity software, including Excel and Word, is the de facto choice for businesses and consumers worldwide given their PCs probably run on Windows. Microsoft does has a big weakness in mobile phones, which are dominated by Apple and Google’s operating systems, although its apps are available on all operating systems.

Investors use this metric to determine how a company’s stock price stacks up to its intrinsic value. Microsoft’s technology platform generates significant earnings defining williams %r indicator and cash flow. That provides it with funds to invest in expanding its operations while returning cash to shareholders through dividends and share repurchases.

• This makes Microsoft’s revenue growth more impressive and hence makes it a better bet.
• So be sure to compare a stock to its industry’s growth rate when sizing up stocks from different groups.
• When it comes to AI, investors have more choices than just Nvidia and the MAMAA stocks.
• Beyond just trimming the fat, Viatris should be able to kick-start its internal drug research in 2024 once debt levels are reduced to more favorable levels.

Once the PC market rebounds, this will remove a significant headwind from Microsoft’s financial results. You can purchase shares of Microsoft directly in a brokerage account. That means once someone buys the productivity suite, they must continue to pay for it every year.

What (else) could drive Microsoft stock higher?

And like the P/E ratio, a lower number is typically considered ‘better’ than a higher number. Microsoft’s EBIT margins were 41.6% in the last twelve month period compared to 31.8% in FY 2018. In comparison, Alarm.com has seen its margins drop to to 8.0% over the last four quarters from 9.2% in FY 2017. While the dent in Alarm.com’s margins has been set off by the revenue growth, Microsoft on the other hand, has been seeing consistent EBIT margin growth in line with the jump in revenues. With Microsoft’s fiscal year ending in June, its ongoing FY is 2022 while Alarm.com’s is 2021.

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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. With its 3-star rating, we believe Microsoft’s stock is fairly valued compared with our long-term fair value estimate. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors.

Microsoft expects its total revenue to rise 16% to 18% year over year in the third quarter. It doesn’t expect its pending acquisition of Activision Blizzard (ATVI -0.05%), which will increase the size of its Xbox business, to close until fiscal 2023. It has dramatically changed its direction, while also altering how consumers see its brand. Once, not even all that long ago, asking «Should I buy Microsoft stock?» would have been met with a resounding «no» since the company seemed stuck with a business model that had become outdated.

Here’s Morningstar’s take on what to think of Microsoft’s earnings and stock. As a result, I think Microsoft isn’t a buy here, but if you already own the stock, it’s not a sell. Microsoft isn’t in danger as an investment, but there are better opportunities out there that are growing faster and can be purchased at a lower price.

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Further, Microsoft’s P/EBIT ratio of 32.2x is significantly cheaper than Alarm.com’s 74.5x, despite a higher P/S ratio of 13.4x vs Alarm.com’s 5.9x. We believe Microsoft has the potential to keep riding forex.com broker review ahead, supported by strong financials and the gap in valuation could further widen over time. As such, we believe that Microsoft is currently a better buying opportunity compared to Alarm.com stock.

As we’ll see, at least two prominent Wall Street experts envision Nvidia continuing to benefit from the AI application industry’s explosive growth. So, don’t give up on Nvidia and don’t make any hasty trades that you’ll probably end up regretting. For one thing, the company’s size makes it an obvious target for antitrust regulators. Microsoft boasts a market cap of $2.5 trillion, making it the second-largest American company, and one that straddles increasingly sensitive industries such as AI, social media, and cloud computing.

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 are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities. Additionally, Exelixis’ robust cash position ($1.8 billion in cash, cash equivalents, and restricted cash) and healthy operating cash flow have allowed it to reignite its internal research engine. This includes advancing internally developed compounds into phase 1 studies, as well as signing collaboration agreements to potentially expand its cancer-drug pipeline.

It also expects its operating margins to rise «slightly» for the full year, while analysts expect its earnings per share to grow about 15%. Microsoft isn’t the screaming bargain it was just a few months ago, as investors have begun to price the value of the company’s foray into AI into the stock. It’s currently trading for 30 times forward earnings, compared to a price-to-earnings ratio of 25 for the S&P 500. Microsoft has been in the gaming industry for many years, mainly through its PC gaming and Xbox console businesses.

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On top of that, Microsoft pays a dividend and has had an active share repurchase program. In Q4, the company returned $4.6 billion to shareholders between buying back shares and dividend payments. The maximum potential upside for MSFT stock is reflected at a P/E of 35 and EPS of 13 leading to a stock price of $455 per share. This is still away from the potential $500 per share we are exploring here. Furthermore, Microsoft is expected to increase its revenues and earnings per share by double-digit percentages between now and 2024.