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On Wed, 17 Jul, 4:03 PM UTC
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Is It Too Late to Buy Microsoft Stock Now? | The Motley Fool
The company's dominant role in tech will likely fuel its stock for years. Microsoft's (MSFT -0.98%) stock has soared 466,000% since it went public in 1986. The company has a history of delivering impressive returns thanks to a potent position in tech and consistent reinvestment in its business. In fact, an early investment in ChatGPT developer OpenAI allowed Microsoft to get a headstart in artificial intelligence (AI), boosting its share price by 89% since the start of 2023. The company rallied investors with AI integration across its various software platforms and impressive earnings growth. Microsoft has come a long way in its nearly 50 years of business, recently the world's second-most valuable company by market cap (only after Apple). However, Microsoft is only just getting started in key growth markets like artificial intelligence and cloud computing, suggesting plenty of room to run. So, despite impressive gains over the years, it's not too late to invest long term in Microsoft. Here's why. As the home of brands like Windows, Office, Xbox, Azure, and LinkedIn, Microsoft wears many hats. The company is dominant in multiple industries, from operating systems to productivity software, video games, cloud computing, and even social media. Meanwhile, consistent reinvestment in its business means it has reliably expanded alongside the tech industry, and earnings reflect this. In the third quarter of 2024 (which ended in March), Microsoft's revenue increased by 17% year over year, outperforming Wall Street estimates by more than $1 billion. The company's productivity and intelligent cloud segments posted sales growth of 12% and 21%, respectively, benefiting from the introduction of new AI services in its Office suite and cloud platform Azure. AI monetization is clearly paying off. However, a 17% jump in its more personal-computing segment also illustrates the diversification of Microsoft's business. The company attributed much of the growth to its Xbox brand. Microsoft said in its Q3 earnings report, "Xbox content and services revenue increased 62%, driven by 61 points of net impact from the Activision Blizzard acquisition." Microsoft completed its purchase of Activision last October, granting it ownership of lucrative game franchises like Call of Duty, World of Warcraft, Overwatch, and more. The acquisition quickly boosted Microsoft's revenue, giving it access to a wealth of content that's already earning through in-game purchases and by allowing the company to expand its game-subscription platform, Xbox Game Pass. In addition to impressive revenue gains, Microsoft's operating income climbed 23% year over year in Q3 after double-digit growth in all three of its primary segments. The company is profiting from growth throughout its business, with earnings only likely to continue rising as its AI, cloud, and gaming divisions develop. Microsoft's stock trades at 34 times its forward earnings, indicating it's not the biggest bargain. Meanwhile, its forward price-to-sales (P/S) ratio is similarly high, at about 12. These metrics are helpful in determining a stock's value as they consider a company's financial standing. Forward price-to-earnings (P/E) ratio is calculated by dividing a company's share price by its estimated earnings per share. Meanwhile, forward P/S divides share price by estimated sales per share. For both metrics, the lower the figure, the better the value. However, the metrics alone don't always tell the whole story. This chart shows Microsoft's forward P/E and P/S are only slightly above their five-year averages, suggesting the company's stock isn't too expensive to consider. Moreover, Microsoft's total revenue hit $212 billion in fiscal 2023. Yet, revenue estimates for 2024 are at $280 billion and are expected to hit $321 billion the following year. The figures represent a more than 50% increase in sales over two years. Considering its earnings have only just begun to reflect its investment in AI and recent gaming acquisition, Microsoft likely has much more growth to offer in the coming years. In fact, the AI market on its own was worth just under $200 billion in 2023 and is expanding at a rate that would see it achieve nearly $2 trillion by the end of the decade. Meanwhile, the company is gradually expanding its presence in the sector with generative features on Azure and its Office productivity suite. Microsoft has long been known for consistent growth and innovation. So, despite considerable gains in recent years, it's not too late to profit from the company's long-term future.
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Is It Too Late to Buy Microsoft Stock Now?
Microsoft's (NASDAQ: MSFT) stock has soared 466,000% since it went public in 1986. The company has a history of delivering impressive returns thanks to a potent position in tech and consistent reinvestment in its business. In fact, an early investment in ChatGPT developer OpenAI allowed Microsoft to get a headstart in artificial intelligence (AI), boosting its share price by 89% since the start of 2023. The company rallied investors with AI integration across its various software platforms and impressive earnings growth. Microsoft has come a long way in its nearly 50 years of business, recently the world's second-most valuable company by market cap (only after Apple). However, Microsoft is only just getting started in key growth markets like artificial intelligence and cloud computing, suggesting plenty of room to run. So, despite impressive gains over the years, it's not too late to invest long term in Microsoft. Here's why. Dominating multiple sectors of tech As the home of brands like Windows, Office, Xbox, Azure, and LinkedIn, Microsoft wears many hats. The company is dominant in multiple industries, from operating systems to productivity software, video games, cloud computing, and even social media. Meanwhile, consistent reinvestment in its business means it has reliably expanded alongside the tech industry, and earnings reflect this. In the third quarter of 2024 (which ended in March), Microsoft's revenue increased by 17% year over year, outperforming Wall Street estimates by more than $1 billion. The company's productivity and intelligent cloud segments posted sales growth of 12% and 21%, respectively, benefiting from the introduction of new AI services in its Office suite and cloud platform Azure. AI monetization is clearly paying off. However, a 17% jump in its more personal-computing segment also illustrates the diversification of Microsoft's business. The company attributed much of the growth to its Xbox brand. Microsoft said in its Q3 earnings report, "Xbox content and services revenue increased 62%, driven by 61 points of net impact from the Activision Blizzard acquisition." Microsoft completed its purchase of Activision last October, granting it ownership of lucrative game franchises like Call of Duty, World of Warcraft, Overwatch, and more. The acquisition quickly boosted Microsoft's revenue, giving it access to a wealth of content that's already earning through in-game purchases and by allowing the company to expand its game-subscription platform, Xbox Game Pass. In addition to impressive revenue gains, Microsoft's operating income climbed 23% year over year in Q3 after double-digit growth in all three of its primary segments. The company is profiting from growth throughout its business, with earnings only likely to continue rising as its AI, cloud, and gaming divisions develop. Is Microsoft worth its premium stock price? Microsoft's stock trades at 34 times its forward earnings, indicating it's not the biggest bargain. Meanwhile, its forward price-to-sales (P/S) ratio is similarly high, at about 12. These metrics are helpful in determining a stock's value as they consider a company's financial standing. Forward price-to-earnings (P/E) ratio is calculated by dividing a company's share price by its estimated earnings per share. Meanwhile, forward P/S divides share price by estimated sales per share. For both metrics, the lower the figure, the better the value. Data by YCharts. However, the metrics alone don't always tell the whole story. This chart shows Microsoft's forward P/E and P/S are only slightly above their five-year averages, suggesting the company's stock isn't too expensive to consider. Moreover, Microsoft's total revenue hit $212 billion in fiscal 2023. Yet, revenue estimates for 2024 are at $280 billion and are expected to hit $321 billion the following year. The figures represent a more than 50% increase in sales over two years. Considering its earnings have only just begun to reflect its investment in AI and recent gaming acquisition, Microsoft likely has much more growth to offer in the coming years. In fact, the AI market on its own was worth just under $200 billion in 2023 and is expanding at a rate that would see it achieve nearly $2 trillion by the end of the decade. Meanwhile, the company is gradually expanding its presence in the sector with generative features on Azure and its Office productivity suite. Microsoft has long been known for consistent growth and innovation. So, despite considerable gains in recent years, it's not too late to profit from the company's long-term future. The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now... and Microsoft wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $787,026!* Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*. Dani Cook has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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An analysis of Microsoft's current market position, recent performance, and future prospects to determine if it's still a good investment opportunity.
Microsoft, a tech giant known for its software products and cloud services, has been a standout performer in the stock market. The company's stock price has surged by approximately 40% year-to-date in 2023, outpacing the broader market indices 1. This impressive growth has led many investors to question whether it's too late to buy Microsoft stock or if there's still room for further appreciation.
Microsoft's financial performance continues to be robust, with the company reporting strong revenue and earnings growth. In its most recent quarter, Microsoft's revenue increased by 7% year-over-year, while its earnings per share (EPS) grew by 10% 2. The company's success is largely attributed to its cloud computing division, Azure, which has been experiencing significant growth and market share gains.
Azure, Microsoft's cloud platform, has emerged as a key driver of the company's growth. It has been consistently gaining market share in the cloud infrastructure market, competing strongly with industry leader Amazon Web Services (AWS). Azure's revenue growth rate of 27% year-over-year in the most recent quarter underscores its importance to Microsoft's overall performance 1.
Microsoft's strategic investments in artificial intelligence (AI) have positioned the company at the forefront of this transformative technology. The integration of AI capabilities across its product suite, including the Microsoft 365 productivity tools and the Bing search engine, has opened up new revenue streams and enhanced user experiences 2. The company's partnership with OpenAI and the development of AI-powered solutions are expected to drive future growth and maintain Microsoft's competitive edge.
Despite its strong performance, Microsoft's stock is trading at a premium valuation. The company's forward price-to-earnings (P/E) ratio stands at around 32, which is higher than its historical average 1. This elevated valuation has raised concerns among some investors about the potential for future returns.
While Microsoft's current valuation may seem high, many analysts argue that the company's strong fundamentals and growth prospects justify its premium pricing. The company's diverse revenue streams, strong balance sheet, and consistent dividend growth make it an attractive option for long-term investors 2. Additionally, Microsoft's ability to adapt to changing market conditions and its leadership in key technology sectors position it well for sustained growth.
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Microsoft's stock presents a compelling investment case despite recent market fluctuations. The tech giant's strong position in AI, cloud computing, and overall financial health make it an attractive option for investors.
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Microsoft's Q4 2024 financial results showcase strong growth, particularly in AI-related sectors. The tech giant's strategic investments in artificial intelligence are paying off, positioning it as a leader in the evolving tech landscape.
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Microsoft's cloud computing platform Azure is experiencing significant growth, challenging Amazon's AWS dominance. This surge presents potential opportunities for investors as the cloud market continues to expand.
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Microsoft's stock performance is impressive, but concerns about its AI-driven valuation are causing some investors to hesitate. This article explores the company's strengths and the potential risks associated with its current market position.
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An in-depth look at Amazon's stock performance, growth potential, and market position. This analysis explores whether it's still a good time to invest in the e-commerce and cloud computing giant.
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