Arguably one of the most pivotal and revolutionary technology companies in contemporary history, Microsoft Corp. (MSFT – Free Microsoft Stock Report), has all but dominated the software and personal computer operating systems markets for almost three decades. Indeed, the stellar and previously unparalleled success of its initial public offering (IPO) in 1986 saw the stock more than triple in less than a year. Since its inception in 1975, the company’s record of entrepreneurial leadership and shrewd business strategies, coupled with its effective product-integration model and keen ability to build successful partner relationships, has truly galvanized its iconic and indelible position among the technology industry’s elite.
While the equity had been range-bound over the past year, it recently shot up to a record high of $53.83 in October. Microsoft’s emergence as an industry leader in the cloud computing arena, coupled with the success of its Surface Book and recent rollout of the Windows X operating system, have contributed to the stock’s impetus. Indeed, the aforementioned equity gains have manifested in spite of less exciting operational results of late, as well as an uninspired outlook for fiscal 2016. Analyst Charles Clark notes in the Commentary section of the page that “the Commercial segment continued to shine. Microsoft made headway in the cloud computing arena, with its annual revenue run rate currently at greater than $8 billion. Office 365, Dynamics CRM, and cloud platform Azure are finding vigorous demand from enterprise customers and should remain important factors in Commercial’s prospects.” Indeed, market experts at Gartner placed Microsoft ahead of Oracle (ORCL) within the leaders' quadrant of their highly touted Magic Quadrant report. The review designated Microsoft as the furthest in vision and gave the company the highest rating for the ability to execute. This recognition is a result of Microsoft’s aforementioned investments in its data platform, including Azure DocumentDB, the managed NoSQL database in the cloud. Gartner credited the company's vision for in-memory computing across products and hybrid cloud implementations, placing it ahead of its competitors in the Magic Quadrant.
Meanwhile, though Mr. Clark, goes on to state that currency headwinds and weaker smartphone-related revenues have contributed to sluggish comparisons, nonetheless, he affirms that “the company’s focus on improving the efficiency of its operations should lead to a wider operating margin”. Although some may contend that the stock is trading at an all-time peak and investors should be wary of a pullback given the revenue and earnings outlook, scanning over to the top left corner of the page to the Ranks box reveals that the issue’s Timeliness rank has been upgraded to 2 (Above Average) from 3 (Average) as of October 23, 2015. This suggests that the stock price is pegged to outpace the broader market means in the year ahead. Moreover, the equity’s beta, which is 0.95, or 5% below the average volatility of the broader market, and the Safety rank of 1, the highest in the Value Line universe, speak to MSFT’s low risk profile. In addition, panning diagonally across the page to the lower right-hand corner, the Financial Strength box offers further support along these lines, as the A++ rating, again the highest in the Value Line universe, coupled with the company’s top marks for Stock’s Price Stability and Earnings Predictability, make MSFT shares one of the safest investments around.
Furthermore, a quick look at the Annual Rates of Change box displays Microsoft’s solid performance growth rates over the five- and 10-year time horizons. The historical financial data in the Statistical Array reveals that, with the exception of 2009, the company’s revenue, net profits, and cash flow per share have all risen every year since 2002. Moreover, a brief scan of the 3- to 5-year Projections, as well as the Price/Earnings Ratio and Dividend Yield in the Top Label ought to serve as the proverbial icing on the cake. Indeed, these factors confirm that, at its recent quotation, Microsoft shares appear to be a highly worthwhile investment, particularly over the long haul.
All told, Microsoft’s recent full-court press into the cloud computing space, its well received and critically acclaimed tablet entrant, Surface, and the promise of a “bigger, faster, stronger” version of its Windows Phone OS, are all very encouraging prospects for revenue and earnings growth in the years to come. We view this equity as a solid, safe choice for the risk-averse buy-and-hold investor.