Is Now the Time to Buy Microsoft (MSFT)?

[View in browser]( [The Spill Logo] BROUGHT TO YOU BY: [Logo]( Proprietary Data Insights Financial Pros’ Top Infrastructure Software Stock Searches in the Last Month Rank Ticker Name Searches #1 [MSFT]( Microsoft Corp 102 #2 [PANW]( Palo Alto Networks Inc 42 #3 [SQ]( Square 27 #4 [DELL]( Dell Technologies Inc 23 #5 [FTNT]( Fortinet Inc 16 #ad [Retirement help at your fingertips]( Brought to you by [Weiss Ratings]( [Tiny AI projects with huge promise hiding in plain sight …]( [Weiss Ratings - Tiny AI projects with huge promise hiding in plain sight …]( AI is all the rage on the stock market right now. The five biggest companies in the world are all heavily invested in artificial intelligence. That’s why those so-called Big Five: Microsoft, Nvidia, Google, Meta and Amazon, have carried the S&P 500 into bull market territory by themselves. And this is just the beginning. But if you’re looking to make the big bucks buying the Big Five … I’ve got bad news. That ship has sailed. But that’s ok. Because a second AI profit window is opening up … And there’s a number of tiny AI projects coming to market right now … [To find out more, click here.]( Should You Hold Microsoft (MSFT)? Despite being the largest company in the world by market capitalization, Microsoft (MSFT) isn’t resting on its laurels. It wants to dominate AI, which it sees as the future of…well…everything. The company was an early investor of OpenAI, dropping over $10 billion for a chance to partner with the hottest tech since personal computers. Financial pros were heavily interested in the latest earnings call, according to our TrackStar data. The company reported an impressive 17% revenue growth, well above the 10.5% 10-year average. Shares are only up 14% year-to-date, only 3% better than the S&P 500. And it’s tough to love a stock that trades at 37x earnings and 29x cash. But does the company’s growth justify the share price? Microsoft’s Business Microsoft Corporation isn't just a big name in tech; it's a game-changer that's constantly evolving to meet the future head-on. Most of us know the company for its groundbreaking Windows operating systems, Office productivity suite, and powerhouse Azure cloud services. The company strives to make things easier, more efficient, and accessible for everyone, whether you're running a small business, leading a large corporation, or just trying to get more out of your day-to-day tech. And with strategic acquisitions like LinkedIn and GitHub, as well as a huge investment in OpenAI, it's clear they're always thinking about the next big thing. Here’s how Microsoft breaks down its business: - Productivity and Business Processes (33% of total revenues) - This is where tools like Office, SharePoint, and Skype shine, helping people stay connected and get work done, no matter where they are. - Intelligent Cloud (34% of total revenues) - It's not just about storing files somewhere in the cloud. Microsoft's server products and services are there to support businesses big and small as they navigate the complexities of modern IT needs. - More Personal Computing (33% of total revenues) - This segment is all about the user experience, with products that range from Windows to Surface tablets and Xbox gaming, all designed to enhance the way we interact with technology. [Highlights] [Source: Microsoft Investor Presentation]( The latest earnings from Microsoft are a testament to its growth, boasting a 17% increase in total revenues, hitting $61.9 billion. This spike is largely fueled by its thriving cloud business, especially Azure, as companies worldwide double down on digital transformation. With AI and machine learning increasingly baked into everything from cloud computing to productivity apps, Microsoft is not just keeping up with the times; it's setting the pace. Financials [Financials] Source: Stock Analysis Microsoft has only had one year in the past decade where revenues declined YoY. Otherwise, it’s averaged 10.5% over the last decade and 14% over the past five years. Margins also expanded, with gross margins jumping 4% from 2019 to 2024, which flowed right down to profit margin. Free cash flow margins remained constrained as Capex skyrocketed from $14 billion to almost $40 billion during that same period. As we said, Microsoft isn’t resting on its laurels. At the same time, the company has repurchased $20 billion in stock while paying $21 billion in dividends for a total yield of 1.2%. While the company has $100 billion in debt, it also carries $80 billion in cash, giving it plenty of balance sheet flexibility. Valuation [Valuation] Source: Seeking Alpha At its current price, Microsoft’s stock isn’t cheap. It trades at 36x earnings and 29x cash, about 11% over its 5-year average. However, competitors like Palo Alto Networks (PANW) and Block (SQ) trade at similar or higher multiples. In fact, only Dell (DELL) is priced at what an investor might consider a discount. Growth [Growth] Source: Seeking Alpha When we compare Dell to everyone else in this group, we see that you’re paying for a growth premium. Palo Alto, Fortinet (FTNT), and Microsoft have all consistently grown sales in the teens or higher for the past several years. And in each case, that’s translated to higher cash flow and, in most cases, profits. Profitability [Profit] Source: Seeking Alpha Microsoft’s margins dominate its peers in nearly every category except gross margin, which is still quite competitive. And it's because of those quality earnings that Microsoft reports high returns on equity, assets, total capital, and a decent free cash flow margin. [Don't Miss Out on Memorial Day Deals!]( Save 25% at LeeLoo Trading Leeloo Express | 14 Days | 12 Contract with coupon DEAL25 [Get started now.]([Ad] Our Opinion 7/10 While we love Microsoft, it’s trading at a premium in a market that’s already a bit frothy. For now, we’d hold off on buying the stock until it pulls back to something more reasonable. Yet, there’s no reason to sell if you own the stock. Microsoft’s growth prospects are fantastic, with new revenue streams in AI and elsewhere opening. [-facebook-share]( [-twitter-share]( [-linkedin-share]( [-email-share](mailto:?body= %3Cbr+%2F%3E%0A%3Cb%3ENotice%3C%2Fb%3E%3A++Undefined+property%3A+stdClass%3A%3A%24previewText+in+%3Cb%3E%2Fvar%2Fwww%2Fhtml%2Fnl_forms%2Fsrc%2FICTheSpill%2Fautomate-ic-article.php%3C%2Fb%3E+on+line+%3Cb%3E102%3C%2Fb%3E%3Cbr+%2F%3E%0Ahttps%3A%2F%2Finvestingchannel.com%2F%3Fp%3D616879?utm_medium=ic-nl&utm_source=119045 ) News & Insights Just Spilled - [Should You Hold Alibaba (BABA)?]( - [Your Money, Your Answers: The Juice Perspective]( - [Should You Buy Walmart (WMT)?]( - [5 Copper ETFs For Your Portfolio]( [News & Insights-facebook-share]( [News & Insights-twitter-share]( [News & Insights-linkedin-share]( [News & Insights-email-share](mailto:?body= %3Cbr+%2F%3E%0A%3Cb%3ENotice%3C%2Fb%3E%3A++Undefined+property%3A+stdClass%3A%3A%24previewText+in+%3Cb%3E%2Fvar%2Fwww%2Fhtml%2Fnl_forms%2Fsrc%2FICTheSpill%2Fautomate-ic-article.php%3C%2Fb%3E+on+line+%3Cb%3E102%3C%2Fb%3E%3Cbr+%2F%3E%0Ahttps%3A%2F%2Finvestingchannel.com%2F%3Fp%3D616879?utm_medium=ic-nl&utm_source=119045 ) [We want to hear from you. Let us know your thoughts by clicking here]( [Ads] [InvestingChannel Logo](#) Follow us on: [Facebook Logo]( [LinkedIn Logo]( [Twitter Logo]( [Instagram Logo]( To ensure delivery of all emails, [allow us on your list](. Manage your subscriptions with our [preference center](. [Unsubscribe here.]( View our privacy policy [here](. Copyright ©2024 InvestingChannel. All rights reserved. 1325 Avenue of the Americas, Floor 27 & 28 New York, New York 10019 Disclaimer: This is not investment advice. This InvestingChannel, Inc., newsletter is for information purposes only and is based on opinion. Futures, forex, stock, and options trading are not appropriate for all investors. There is a substantial risk of loss associated with trading these markets. Losses can and will occur. No system or methodology has ever been developed that can ensure returns or eliminate losses. InvestingChannel, Inc., makes no representation or implication that using any of the methodologies or systems in this newsletter will generate returns or insure against losses. Investors should be cautious about any and all investments and are advised to conduct their own due diligence prior to making any investment decisions. [Link](