A Strong Foundation and a Growing Base – The Case for Microsoft

Microsoft is a $775 Billion company by market cap with $110 billion in revenue in Year 2018. The company has undergone is revitalization since Satya Nadella took over in 2014. Since 2014, Microsoft’s stock price has gone up +180%. This is in part due to the company’s move to cloud computing in which Nadella played a huge part.
Microsoft stock performance from Nasdaq.com
With a debt to equity ratio of 0.88 and a profit margin of 30% as of September 30, 2018, Microsoft is in a good position from a balance sheet standpoint but let us take a deeper dive into its business. Looking forward to Year 2019, Microsoft should be able to maintain an edge against its competition with future plans set in place. Microsoft expects net income to increase by 32% FY19 Q1 and the gross margin from its cloud business to average around 62%. The cloud business is predominantly driven by Azure. Azure continues to gain market share in the cloud computing world but faces intense competition from Amazon Web Services and Google Cloud.
Microsoft is now really starting to reap the benefits from its LinkedIn acquisition back in 2016. LinkedIn’s revenue grew 33% with a substantial engagement growth in LinkedIn sessions. Microsoft Office continues to drive revenue but Azure, LinkedIn, and the other segments do play a part in the continued growth of the company. The 2018 free cash flow topped $10 Billion and the 2018 acquisition of GitHub should help encourage a developer friendly environment as well as provide a new audience for Microsoft’s tools and services.
I initially added Microsoft to my portfolio in 2017 and I expect to be adding more during market dips in the future. I utilize M1 Finance as my favorite investment platform as it is free to purchase stocks and ETFs.

Comments

Recent Posts