The Dow Jones Industrial Average fell 650 points yesterday. This down move provides a buying opportunity for what I believe are the two best stocks to buy for November, Microsoft (MSFT) and Salesforce.com (CRM).
The index fell due to an increase in coronavirus infections and a stalemate in negotiations for a fiscal stimulus package. The DJIA closed 650.19 points, or 2.3% lower tonight, and the S&P 500 slid 1.9% to 3,400.97. This was the Dow’s biggest one-day loss since September 3rd and its first close below the 28,000 mark since October 6th. MSFT was down 2.84%, and CRM was down 3.41% for the day.
While the DJIA is heavily skewed towards the industrial sector, its inclusion of large-cap technology blue-chip stocks represents technology’s impact on our economy and the markets. MSFT and CRM are two great examples of this.
Here’s why I believe now is an opportune time to buy these two strong companies:
MSFT has definitely benefited from the COVID-19 pandemic. It has seen strong momentum in its cloud-based products, which includes SharePoint, Dynamics, Teams, and the SaaS (365) versions of its Microsoft Office software. Its Azure cloud services product is also driving robust revenue. Azure will be especially important to MSFT’s future as the business world is seeing a shift toward cloud utilization.
The company’s Microsoft Teams solution offers strong growth potential due to its existing user base and may soon catch up to Zoom (ZM). MSFT is releasing its Xbox Series X console in two weeks on November 10th. I believe this will drive strong sales into the upcoming holiday season. The always reliable Windows operating software has been a cash cow for the company for a long-time and should continue to.
The company’s entries into artificial intelligence and augmented/virtual reality should add more future revenue streams. MSFT reports its latest financial results today after the close, and analysts forecast EPS to be $1.53, which would be a 23.4% increase from the year-ago quarter. Revenue is expected to grow 11.4% next year.
The stock is rated a “Buy” in our POWR Ratings system. It holds a grade of “A” for Trade Grade, and a “B” for Buy & Hold Grade, Peer Grade, and Industry Rank. The stock is also ranked #19 in the Software – Application industry,
As much as MSFT has benefited from the remote working trend due to its cloud offerings, CRM might give it a run for its money. CRM is the undisputed leader in the CRM space. The company had very strong growth numbers in its latest release as EPS grew 115.1% last year, while sales increased by 31.6%. Sales are expected to grow by 17.9% next year.
CRM was one of the first companies to offer the software-as-a-service (SAAS) model. The company has benefited from increased demand for businesses looking to make a digital transformation. Since the platform is now cloud-based, it is seeing a rapid adoption of its products. Revenue should increase as the company adds more products and solutions.
While the company is still up 48.8% year to date, I still see room for growth. According to TipRanks, out of the 28 analysts covering the stock, 26 view it as a “Buy,” with a price target of $275.62. That’s 13.9% higher than Monday’s closing price of $241.98.
The stock is rated a “Buy” in our POWR Ratings system. It holds a grade of “A” for Trade Grade and a “B” for Buy & Hold Grade and Industry Rank. The stock is also ranked #6 in the Software – Business industry.
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About the Author: David Cohne
David Cohne has 20 years of experience as an investment analyst and writer. Prior to StockNews, David spent eleven years as a Consultant providing outsourced investment research and content to financial services companies, hedge funds, and online publications. David enjoys researching and writing about stocks and the markets. He takes a fundamental quantitative approach in evaluating stocks for readers. More...
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