MSFT Stock Forecast

“Success is a lousy teacher. It seduces smart people into thinking they can’t lose.” – Bill Gates

Summary:

• The current Market Cap for Microsoft Stock is $860 Billion dipping slightly below Amazon and Apple.
• Microsoft reduced its reliance on Windows software for PCs and became a major player in cloud computing.
• Microsoft’s commercial cloud revenue, which primarily consists of revenue from Office 365 commercial, Azure, Dynamics 365, and other cloud properties, captures the extraordinary momentum of the cloud-driven growth engine.

Source: Coolcaesar via Wikimedia

A blog dated April 2007 written by Paul Graham founder of Y Combinator entitled “Microsoft is Dead” detailed in this post how Microsoft Stock (MSFT) is no longer a major player in the software world. However, on Friday Microsoft briefly reclaimed the crown as the world’s most valuable publicly traded company, a position it hadn’t held since 2002. The current Market Cap for Microsoft is $860 Billion dipping slightly below Amazon and Apple however it is illustrative of its continued presence on the map and it does not appear to be going anywhere.

The above chart compares the stock change of Microsoft stock compared to Apple over the past three months. This chart illustrates how Microsoft has over the past month significantly outperformed Apple stock. While on inspection Microsoft still does not represent any large increase or growth it does illustrate the stability that underpins Microsoft stock. Whilst this does not provide investors with any near-term assurances a stable company poses as a good investment for those seeking long term returns. One of the reasons that Microsoft languished during the 2000s was the inability of the company to grow as fast as the market had priced during the tech bubble. Microsoft earned billions and billions of dollars from 2000 to 2009 and the multiple fell and fell. MSFT dramatically underperformed the market during this time.

Apple’s market capitalisation overtook Microsoft’s in 2010 as Microsoft struggled with slow demand for personal computers, due in part to the explosion of smartphones like the iPhone. After Satya Nadella took over as chief executive in 2014, Microsoft reduced its reliance on Windows software for PCs and became a major player in cloud computing, second only to Amazon.com Inc (AMZN.O).

The Most Valuable Company Again

Microsoft Corporation (MS) is an American multinational technology company with headquarters in Redmond, Washington. It develops, manufactures, licenses, supports and sells computer software, consumer electronics, personal computers, and related services. Its best-known software products are the Microsoft Windows line of operating systems, the Microsoft Office suite, and the Internet Explorer and Edge web browsers. Its flagship hardware products are the Xbox video game consoles and the Microsoft Surface line-up of touchscreen personal computers.

(Source: flickr)

Arguably, the story starts with leadership. Former CEO Steve Ballmer lacked the strategic vision to lead Microsoft in the evolving tech world. As recently as 2013, Ballmer still felt that Windows was the future of the company. He wrote at the time that:

“I am convinced that by deploying our smart-cloud assets across a range of devices, we can make Windows devices once again the devices to own.”

Just five years later, under new leadership from CEO Satya Nadella, Microsoft shut down Windows as an operating division of the company. Microsoft split part of the windows team into its Azure cloud, with others going to the Office 365 division. By ditching its obsession with Windows at all costs, Microsoft has opened an attractive range of services from social media to productivity, hardware, virtual reality and the cloud.

Though Microsoft’s operating segments are broken down into three major segments called productivity and business processes, intelligent cloud, and more personal computing, investors risk looking over the software giant’s greatest tailwind if they only analyse Microsoft by these segments. To fully appreciate its business transformation in recent years, investors should turn to Microsoft’s commercial cloud revenue — a categorisation of revenue that lumps together commercial cloud products across Microsoft’s business segments.

The cloud is transforming traditional computing and Microsoft Office traditionally a computer based program was forced to change and adapt to compete with the other providers such as Google and Amazon.

Microsoft’s commercial cloud revenue, which primarily consists of revenue from Office 365 commercial, Azure, Dynamics 365, and other cloud properties, captures the extraordinary momentum of the cloud-driven growth engine Microsoft has crafted under Nadella’s leadership. “Going forward, it’s a mobile-first, cloud-first world,” said Satya Nadella, the newly appointed CEO of Microsoft, last week. MSFT shares are up in a good agreement with the I Know First bullish forecast published on seeking alpha for MSFT issued at the time Nadella took the lead.

Source: Yahoo Finance

Conclusion

The current long-term forecast for Microsoft is bullish. Microsoft have shown a commitment and renewed spirit both in cloud services, gaming and a willingness to back down over the windows platform and allow room for other products to grow and flourish. The market sees Microsoft as the leading player in computer operating system software and productivity applications, but there’s a lot of tech going on beneath the surface. For one thing, Microsoft was awarded a $480 million U.S. Army contract this past week for augmented-reality systems. The deal calls for the Department of Defence to buy as many as 100,000 headsets, using augmented reality to give troops a leg up in training and to make better combat decisions.

Current I Know First Forecast

The current forecast for Microsoft for the one-year time frame is bullish with a signal of 145.47 and predictability indicator of 0.59.

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How to interpret this diagram

Please note-for trading decisions use the most recent forecast.