Microsoft Corporation (MSFT) develops, licenses, and supports a range of software products and services worldwide. It operates through three segments – Productivity and Business Processes, Intelligent Cloud, and More Personal Computing.
MSFT’s global cloud services platform ‘Azure’ is one of the most popular cloud platforms in the world. As remote working is expected to continue even after COVID-19 is defeated, demand for cloud technology and related innovative software applications is likely to accelerate, paving the way for MSFT to hit new highs in the near future.
The company has established efficient and environment-friendly design, construction and ongoing operation of buildings and spaces through modeling, analytics, and digital control mechanisms. Delivering this value-added capacity has helped its stock gain 37.4% over the past year. This impressive performance combined with several other factors has earned MSFT a “Strong Buy” rating in our proprietary rating system.
Here is how our proprietary POWR Ratings system evaluates MSFT:
Trade Grade: A
MSFT is currently trading above its 50-day and 200-day moving averages of $216.55 and $211.96, respectively, indicating that the stock is in an uptrend. In fact, the stock’s 5.6% gains over the past six months reflect solid short-term bullishness.
MSFT’s total revenues have increased 12.4% year-over-year to $37.15 billion in the fiscal first quarter ended September 30, 2020. Its operating income has improved 25.1% year-over-year to $15.88 billion over the same period, while its EPS has increased 31.9% year-over-year to $1.82.
In December, MSFT collaborated with Accenture (ACN) to help CNH Industrial enhance its digital capabilities and develop smart connected products and services. MSFT will provide its industry experts, digital advisors, and consulting services to develop and create new connected products, leveraging its artificial intelligence innovation.
Also in December, MSFT entered a global collaboration with Johnson Controls (JCI) to integrate its Azure Digital Twins with JCI’s OpenBlue Digital Twin. This integration across digital twin technologies will enable users to digitally manage physical spaces, maximize efficiency, and pilot new solutions.
MSFT has also recently renewed its partnership with Deutsche Telekom Group for the next seven years to deliver enterprises and midmarket customers high-performance cloud computing experiences. This partnership will enable customers to increase their productivity, build more agile and resilient operations, and deliver new cloud offerings faster.
Buy & Hold Grade: A
In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers , MSFT is well-positioned. The stock is currently trading 6.4% below its 52-week high of $232.86.
The company’s net revenue has grown at a CAGR of 14% over the past three years. This can be attributed to its successful strategy in encompassing the entire ecosystem of building and device management technologies with digital cloud technologies.
Peer Grade: B
While ADBE beat MSFT by gaining 46.4% over the past year, ORCL gained 17.1%. SAP, in contrast , declined 3% over this period.
Industry Rank: B
The Software – Application Industry is ranked #26 of the 123 StockNews.com industries. The companies in this industry are focused on designing, developing, publishing, and supporting software used to collect, store, report, and analyze data from various business operations.
The tech industry has emerged out as a clear winner amid the new normal. As major business activities are being operated through cloud technologies, the need for new innovative software to meet increasing technology demands has been accelerating. This, along with continued remote working culture, we think should bolster this industry’s growth in the near future.
Overall POWR Rating: A (Strong Buy)
MSFT is rated “Strong Buy” due to its impressive past performance and short-term bullishness, as determined by the four components of our overall POWR Rating.
Despite climbing more than 40% over the past nine months, MSFT has the potential to advance further based on its continued business growth, favorable earnings and revenue outlook and price momentum.
Analyst sentiment, which gives a good sense of a stock’s future price movement, is good r MSFT. It has an average broker rating of 1.29, indicating favorable analyst sentiment. Of 34 Wall Street Analysts that rated the stock, 16 rated it “Strong Buy.” Analysts expect MSFT’s revenues to rise 8.9% year-over-year to $40.19 billion in the fourth quarter ended December 31, 2020. The consensus EPS estimate of $1.64 for the about-to-be reported quarter (ended December 31, 2020) represents an 8.6% rise year-over-year. The company has an impressive earnings surprise history as well; it beat the Street EPS estimates in each of the trailing four quarters. This outlook should keep MSFT’s price momentum alive in the near term.
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MSFT shares rose $0.55 (+0.26%) in after-hours trading Wednesday. Year-to-date, MSFT has declined -4.57%, versus a -0.09% rise in the benchmark S&P 500 index during the same period.
About the Author: Rishab Dugar
Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands. More...
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