<p>Among technology companies, Microsoft (NASDAQ: MSFT) is considered mature. Microsoft’s shares have a market value north of $ 1 trillion, it pays dividends (a steady rise on it) and the company was listed in 1978. So pretty much any distance Microsoft is really a mature company.
But even with the above characteristics, Microsoft stocks have many of the hallmarks of a growth or momentum stock. Last week, the company said it earned $ 1.37 per share on revenue of $ 33.72 billion for its most recent financial quarter, slightly exceeding Wall Street estimates of $ 1.21 per share on sales of $ 32.77 billion dollars.
“It was a record year for Microsoft, a result of our deep partnerships with leading companies in all industries,” said Microsoft CEO Satya Nadella in the results announcement.
Microsoft is also richly valued, a move that is often reserved for younger growth companies. With almost 27x futures earnings and 10.20x book value, Microsoft is more expensive than Apple (NASDAQ: AAPL), a name often seen as a growth stock. However, Microsoft stocks deserve the high multiples. Even more important is that the company delivers the growth required so that these multiples are not so shady.
Some analysts apparently say that Microsoft stocks offer “growth at a reasonable price” and that the company’s ability to implement not only motivates its rich values, but can also mean more upward for the stocks.
Fantastic Azure of MSFT stock
When we reviewed the Microsoft stock here in March, it was noted that the company’s cloud computing business was an important part of the bull thesis for the shares. In the fast-growing arena for cloud services, Microsoft competes with a lot of companies, including more agile rivals, but in the company’s cloud space, the main rival is Amazon (NASDAQ: AMZN) Amazon Web Services (AWS).
Some market observers have expressed doubts about Microsoft’s ability to eat into AWS’s market share, but recent quarterly results show that Azure, Microsoft’s cloud business, is doing well. When our article was published in mid-March, Microsoft traded around $ 115. It closed over $ 139 on Tuesday.
“With its large installed base of enterprise customers, hybrid cloud services and a lack of channel conflicts, we see Microsoft as the best-positioned provider of enterprise adaptation clouds, which is accelerating and a huge opportunity,” said Oppenheimer analyst Timothy Horan after the earnings report.
AT&T (NYSE: T) recently chose Azure for its cloud computing needs and marked a $ 2 billion contract win for Microsoft. Compared to the year before, Azure had a sales growth of 64%, and some naysayers call that “slowing down.” You know that there is a legitimate growth history on your hands when someone complains about 64% increases.
“Overall, the results continue to strengthen our dissertation, focusing on customizing hybrid cloud environments with Azure,” says Morningstar. “Microsoft continues to use its dominant position for local architecture to allow customers to move to the cloud easily and at their own pace, which we believe will continue. The adoption of cloud services in the form of SaaS, PaaS and IaaS remains robust for Microsoft and the company has passed inflection points. ”
As of this writing, Microsoft has a market capitalization of $ 1.07 trillion dollars, but some analysts believe that the number could jump to $ 1.3 trillion next year, indicating that 27x futures earnings are appropriate if not directly attractive.
In addition, Microsoft shares are not just a cloud story. The company has several convincing, growing revenue streams. Microsoft Office is growing. LinkedIn revenue increased 14% last quarter. Microsoft can easily become a game of artificial intelligence and it is already a dominant force in video games. There are two fast-growing markets there and those that are not always appreciated when it comes to Microsoft stocks.
Todd Shriber does not make any of the above securities.