Microsoft Corporation (MSFT) Stock: Buy This Old Dog for Its New Tricks

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Companies like Microsoft Corporation (NASDAQ: MSFT ) are rare for a reason. You can call it the Polaroid effect: Scientist and inventor Edwin H. Land's idea for a light polarizing lens sparked multiple innovations, including instant photography .

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Together with businessman George Wheelwright, Land formed Polaroid in 1937. Land and Wheelwright completely dominated the instant photography sector, until that sector was no longer relevant. Once considered an economic bellwether, Polaroiddeclared bankruptcy in 2001.

True, the company is back on the wheel again, but not before taking down its original investors. Worst of all, they're an afterthought. Polaroid is seemingly stuck in a reality that has seen its zenith 30 years ago. It's a fate that anyone vested in MSFT stock will obviously want to avoid. Still, it is a legitimate fear, especially among technology companies. In this day and age, if you're not ahead, you're almost intractably behind.

MSFT Stock Is Getting the Job Done

Based on its most recent second-quarter earnings report , Microsoft stock is in good hands. On a year-over-year basis, earnings grew 3.6%, matching consensus estimates for 79 cents per share. Top-line sales increased by a 2.2% margin over the year-ago level, which slightly exceeded forecasts. While InvestorPlace writer Tom Taulli is correct in pointing out that these aren't earth-shattering figures for MSFT stock, they're more than good enough.

I've made the argument before that Microsoft stock is steady, not sexy - and that's not a bad thing. Sure, everybody loves Ferrari N.V. (NYSE: RACE ) and its incredible machines. Rarely do people rave when they have to spend an inordinate amount of time in the shop. I'm not suggesting that MSFT stock is the market equivalent of a minivan; what I am saying is that it's not going to pull too many unwanted surprises.

Take a look at the broader picture of its earnings performances. In the past fourteen quarters inclusive of the latest Q2, MSFT shares have only failed to meet earnings consensus twice. Of those misses, the negative surprise averaged 6% below forecast. While that's a notable ding, the total average earnings surprise for Microsoft stock in the aforementioned time frame is well over 8%.

No matter how you look at it, that's a respectable trend. It's especially true given that MSFT is an old dog with fierce rivals chomping at the bit.

Microsoft Is Still in the Innovation Game

CEO Satya Nadella has made it no secret that he wants MSFT stock to be more than just a play on software and computers. To that end, the company has been investing heavily in cloud applications. It's a market that is projected to jump from last year's $204 billion to $318 billion in two years' time.

Unfortunately, it's a market that has stiff opposition for Microsoft stock. Public enemy number one is, Inc . (NASDAQ: AMZN ), which commands air superiority in the cloud. SAP SE (ADR) (NYSE: SAP ), International Business Machines Corp. (NYSE: IBM ) and Oracle Corporation (NYSE: ORCL ) are big league players that are eager to make their presence known. Certainly, they're not going to make the ride easy for those vested in MSFT shares.

This, however, is one of those areas where being an old dog has its advantages. Primarily, MSFT stock carries the leverage of a ubiquitous, utilitarian brand. While SAP and Oracle have powerful cloud applications, chances are, unless you're a business analyst for a Fortune 500 company, you're not going to be too familiar with their platforms. Even Amazon has a little bit of a vulnerability in this area, considering that it's mostly used as an e-commerce function.

For Microsoft stock, it's all about selling the trust factor. Everybody - from the high school student writing a research paper to experts from all industries - knows MSFT's platform . Many of us have literally grown up with the company. Already, there's an entire generation of workers that have known nothing but Microsoft Windows' graphical user interface.

MSFT Is Backed by Smart Moves

This familiarity definitely carries substance to it. Back in January of 2014 - after the "One Microsoft" brand message was launched - the tech giant became the most trusted company according to a brand survey conducted by Forrester Research. Beating out Apple Inc . (NASDAQ: AAPL ), this led Forrester analyst Tracy Stokes to conclude that Microsoft "has a utilitarian essentiality, not the kind of emotional essentiality that Apple relies on."

Although the remarks were made three years ago, they're still spot on today. For example, Microsoft's acquisition of LinkedIn gives it an incredible professional network: LinkedIn has 467 million users and 128 million in the U.S. - roughly 40% of our total national population. Better yet for MSFT stock, that 40% represents the company's target audience - tech savvy, money-making individuals.

To be sure, Microsoft has a lot of challenges. Obviously, the personal computer segment isn't doing anyone any favors. At the same time, investors in MSFT shares don't have to worry about the Polaroid effect. Management is making smart moves that are paying dividends - literally and figuratively.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.

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The post Microsoft Corporation (MSFT) Stock: Buy This Old Dog for Its New Tricks appeared first on InvestorPlace .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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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