MSFT stock has been hurt far less during the recent market downturn than some of its fellow titans such as Apple AAPL and Amazon AMZN . And right now, the historic tech powerhouse's stock looks like a buy based on its growth outlook and positive earnings revision trends.
Overview & Outlook
Microsoft has expanded into everything from artificial intelligence to IoT. Today, the company is also one of the largest cloud computing firms in the world. MSFT
grabbed roughly 15% of the cloud market share last quarter, which helped it come in second behind only Amazon, and above IBM IBM , Google GOOGL , and Alibaba BABA .
KO , FedEx FDX , Ford F , Walmart WMT , and other giants are all Microsoft cloud or AI customers. Plus, the firm is coming off a fiscal first quarter that saw its revenues surge 19% to reach $29.1 billion, where its personal computing unit was once again the largest contributor with sales up 15% to $10.7 billion.
This growth was driven by an Xbox-fueled 44% surge in gaming revenues. Microsoft's subscription-based Xbox Game Pass, which has been described as Netflix
NFLX for video games, has performed well. Going forward, the company and CEO Satya Nadella plan to expand the gaming division as the overall market continues to surge.
Microsoft has also made
15 acquisitions during the 2018 calendar year. This includes its $7.5 billion purchase of open-sourced software platform Github and marked yet another double-digit year of acquisitions for MSFT.
As we mentioned at the top, shares of Microsoft have performed better than the larger market over the last three months. Plus, shares of MSFT have surged over 26% in the last year to outpace its industry's 2% decline and the S&P 500's 1% dip.
Still, MSFT stock hovered at around $107.72 per share through late afternoon trading Tuesday. This marked a roughly 7% downturn from its 52-week high of $116.18 a share and could set up a solid buying point for those high on Microsoft.
Meanwhile, Microsoft is currently trading at 23.1X forward 12-month Zacks Consensus EPS estimates, which marks a discount compared to its industry's 28.7X average. Better yet, MSFT has traded as high as 27X over the last year, with a one-year median of 24.7X. We can also see that the company has consistently traded at a discount compared to its industry over the last decade.
Moving on, Microsoft's quarterly revenues are expected to jump 12.2% to reach $32.46 billion, based on our current Zacks Consensus Estimate. Meanwhile, its full-year revenues are projected to climb at a similar rate to reach $124.08 billion. Plus, the following year is expected to jump 10% above our current fiscal year projection.
At the bottom end of the income statement, Microsoft's adjusted quarterly earnings are projected to surge 13.5% to hit $1.09 per share. Better still, MSFT's full-year EPS figure is expected to expand by over 14%-with its fiscal 2020 EPS figure projected to expand 11.5%.
Investors can also see that Microsoft's earnings estimate revision picture has turned much more positive over the last 60 days. This long-term, full-year earnings positivity helps MSFT earn a Zacks Rank #2 (Buy).
Therefore, it seems like Microsoft might be worth buying at the moment, especially when we remember that the tech power is a dividend payer that has consistently raised its quarterly payout over the years.
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With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
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