Is Microsoft still a buy?

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Microsoft (Microsoft Stock Quote, Chart, News, Analysts, Financials NASDAQ: MSFT) hit new all-time highs in recent weeks, but is the stock still a buy? You bet, says portfolio manager Alex Ruus, who believes Microsoft is the only one among the big tech giants.

“Microsoft is one of the preeminent tech stocks, and we really love it and own it in the portfolio,” said Ruus of Arrow Capital Management, who spoke on BNN Bloomberg on Friday.

“I don’t own a lot of tech because a lot of tech stocks have become extremely overvalued here, but Microsoft would always fall into a below-fair-value category,” he said. “We bought the title in 2009 and continue to hold it here and we think it will increase.”

Now in the thin air of the $ 2 trillion club, Microsoft has been a strong performer in the first half of the year, returning 22% over that period, compared to 14% for the strong NASDAQ index. technicality. Amazon only returned 5.5% in the first six months, while Apple grew by 4% and Facebook by 27%. Google emerged victorious among FAANG-type stocks with 39%.

Microsoft has been widely praised in recent years for its ability to continue to grow despite its size and longevity as a technological backbone. Straddling software and hardware, MSFT continued to grow its Azure cloud business while supporting its Office and Teams products which still dominate much of the consumer and commercial markets.

“It’s a pretty remarkable business,” Ruus said. “When you hit a trillion dollar valuation, and very rarely do you see that size of business showing accelerated growth. “

“Due to the transition to cloud computing, Microsoft, along with Amazon, is one of the top two providers of business cloud services, and their business has accelerated and, as a result, Microsoft’s actions have performed well,” did he declare.

“It’s not as cheap as it used to be, but it’s still good value here, so if you want to invest in the tech industry, we still love Microsoft,” Ruus said.

Microsoft’s revenue growth has been remarkable of late, with the company’s fiscal third quarter (delivered in late April) posting revenue up 19% year-on-year to $ 41.7 billion . Net income for the third quarter was $ 15.5 billion, up 44%, while earnings of $ 1.95 per share were up 39%. Analysts had estimated earnings of $ 1.78 per share on revenue of $ 41.03 million.

Just as he said a year ago at the start of COVID-19, Microsoft CEO Satya Nadella commented in the Q3 press release that the digital transformation underway across all sectors of the economy was boosted by the pandemic-induced changes in business. environment, for the benefit of Microsoft.

“More than a year after the start of the pandemic, digital adoption curves are not slowing down. They’re accelerating, and that’s just the start, ”Nadella said in an April 27 press release. “We are building the cloud for the next decade, expanding our addressable marketplace and innovating at all levels of the technology stack to help our customers be resilient and transform. “

Microsoft appears to be operating at full capacity, with revenues remaining strong in most of its business segments. Productivity and Business Processes saw revenue increase 15% to $ 13.6 billion, Intelligent Cloud by 23% to $ 15.1 billion, while More Personal Computing, which contains Windows advertising, its lines Surface and Xbox product and search advertising revenue, rose 19% to $ 13.0 billion.

The company impressed with its forecast, calling for fiscal fourth quarter revenue of between $ 43.6 billion and $ 44.5 billion, compared to an average of $ 42.98 billion forecast by analysts.

Microsoft is also doing well with its shareholders, regularly engaging in share buyback programs and continuing to pay a modest but long-standing dividend, currently with a return of 0.8%. Last year, the company bought more than $ 24 billion of MSFT shares.

Investors may have their favorites among US Big Tech stocks, but when it comes to the two billion dollar names – Microsoft and Apple – JC O’Hara, chief market technician at MKM Partners, says the comparative outperformance of Microsoft so far this year is expected to give Apple the edge, at least for now.

“If we’re in a bull market and the hallmark of this overall bull market is rotation, I think Apple is preparing here for a good catch-up trade. Look at some of its peers – Facebook is breaking out, Microsoft is breaking out, Google is breaking out ”, O’Hara said, in a segment on CNBC’s Trading Nation on June 24.. “It’s only a matter of time before Apple breaks out… The catch-up trade will outgrow the near-term momentum that Microsoft is seeing.”

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