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Microsoft Corp. (MSFT) is a broad-based technology provider, offering software products, services, and devices to both enterprise and individual customers. They also design, manufacture, and market hardware products such as PCs, gaming and entertainment devices, and tablets. Their offerings encompass a broad range of services, from cloud-based solutions to solution support and consulting services. Founded in 1975, their headquarters is in Redmond, Washington.
Microsoft stock has gained 29% over the past 52 weeks and 5% so far in 2024, pushing its market cap to a massive $2.9 trillion - the largest publicly traded company in the world by this metric.
The rally over the last year has been fueled in part by enthusiasm over artificial intelligence (AI), with Microsoft making big investments in OpenAI to stay on the leading edge of the new revolution in tech.
MSFT Earning Tops Estimates
Microsoft released its fiscal 3Q results last week, with the software company’s revenue increasing 17% YoY to $61.86 billion, and beating market estimates of $60.80 billion. Earnings stood at $2.94 per share, which also surpassed analyst’s expected $2.82 per share.
Microsoft’s Azure cloud played a key part in the earnings outperformance. Its Intelligent Cloud segment earned $26.71 billion in the quarter, a 21% increase YoY that edged out Wall Street’s estimated $26.26 billion. A full 7 percentage points of Azure growth was fueled by AI, according to MSFT.
The company’s guidance for the current quarter calls for revenue of $64 billion, just short of analysts' expected $64.50 billion.
Bill Gross and Value Stocks
Pacific Investment Management Co.’s co-founder Bill Gross recently said in a post on X (formerly Twitter) that Microsoft is a standout when it comes to tech stocks. The Pimco boss and “bond king” isn't the biggest stock booster in general, but said, “MSFT best in tech if you must," even as he warned investors to stick with value stocks over tech more broadly.
A look at Microsoft’s valuation after their recent earnings report suggests the tech giant may well be undervalued, with the company continuing to deliver higher free cash flow (FCF) even as it increases capex spending to merge AI into its products.
Notably, MSFT stock has also been increasing its dividend consistently for the past 19 years. The stock yields 0.77% at current levels.
Is MSFT Stock a Buy?
Analysts are in love with MSFT stock, judging by the consensus “Strong Buy” rating and mean price target of $470.26 - which indicates expected upside potential of 19% from current levels.
At present, 37 analysts are covering the stock, with 33 “Strong Buy” ratings, 3 “Moderate Buy” ratings, and just 1 tepid “Hold” rating.
