How much a stock's price changes over time is a significant driver for most investors. Not only can price performance impact your portfolio, but it can help you compare investment results across sectors and industries as well.
Another thing that can drive investing is the fear of missing out, or FOMO. This particularly applies to tech giants and popular consumer-facing stocks.
What if you'd invested in Microsoft (MSFT) ten years ago? It may not have been easy to hold on to MSFT for all that time, but if you did, how much would your investment be worth today?
Microsoft's Business In-Depth
With that in mind, let's take a look at Microsoft's main business drivers.
Microsoft Corporation is one of the largest broad-based technology providers in the world. The company dominates the PC software market with more than 73% of the market share for desktop operating systems.
The company’s Microsoft 365 application suite is one of the most popular productivity software globally. It is also one of the prominent public cloud providers that can deliver a wide variety of infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS) solutions at scale.
Redmond, WA-based Microsoft’s products include operating systems, cross-device productivity applications, server applications, business solution applications, desktop and server management tools, software development tools and video games. Its software solutions and hardware devices are playing an important role in developing the metaverse.
The company designs and sells PCs, tablets, gaming and entertainment consoles, other intelligent devices, and related accessories. Through Azure, it offers cloud-based solutions that provide customers with software, services, platforms and content.
Microsoft reported revenues of $211.9 billion in fiscal 2023. The company reports operations under three segments: Productivity & Business Processes, Intelligent Cloud and More Personal Computing.
Productivity & Business Processes accounted for 32.6% of fiscal 2023 revenues. The segment offers productivity and collaboration tools and services including Office 365, Dynamics business solutions, Teams, Relationship Sales solution, Power Platform and LinkedIn.
Intelligent Cloud, which include Azure cloud services, contributed to 41.4% of fiscal 2023 revenues.
In Jan, 2022, the company entered into a definitive agreement to acquire Activision Blizzard. The acquisition will accelerate the growth in Microsoft’s gaming business across mobile, PC, console, and cloud gaming. Microsoft and Activision Blizzard have jointly agreed to extend the merger agreement through Oct 18, 2023 to allow for additional time to resolve remaining regulatory concerns.
More Personal Computing represented 25.8% of fiscal 2023 revenues. The segment comprises mainly the Windows, Gaming (Xbox hardware and Xbox software and services), Devices (Surface, PC accessories, and other intelligent devices) and Search (Bing and Microsoft Advertising) businesses.
Putting together a successful investment portfolio takes a combination of research, patience, and a little bit of risk. For Microsoft, if you bought shares a decade ago, you're likely feeling really good about your investment today.
According to our calculations, a $1000 investment made in January 2014 would be worth $10,826.55, or a gain of 982.66%, as of January 19, 2024, and this return excludes dividends but includes price increases.
Compare this to the S&P 500's rally of 160.02% and gold's return of 58.17% over the same time frame.
Analysts are anticipating more upside for MSFT.
Microsoft is riding on strong growth from Intelligent Cloud and Productivity and Business Processes. Intelligent Cloud revenues have been driven by growth in Azure and other cloud services. Productivity and Business Processes revenues continues to increase due to strong adoption of Office 365 Commercial solutions. Continued momentum in the small and medium businesses and frontline worker offerings, as well as gain in revenue per user drove top-line growth. We expect fiscal 2024 net sales to grow 12.7% from fiscal 2023. However, More Personal Computing revenues are suffering from continued weakness in Windows and Devices businesses. Steady performance in Talent Solutions aided LinkedIn revenues. However, declining gaming revenues has been a headwind. Increasing spend on Azure enhancements amid stiff competition in the cloud space remains a concern.The stock is up 5.44% over the past four weeks, and no earnings estimate has gone lower in the past two months, compared to 1 higher, for fiscal 2023. The consensus estimate has moved up as well.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.