Zacks Equity Research
·4 min read
For most investors, how much a stock's price changes over time is important. This factor can impact your investment portfolio as well as help you compare investment results across sectors and industries.
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.
Bottom Line
Anyone can invest, but building a successful investment portfolio takes a combination of a few things: research, patience, and a little bit of risk. So, if you had invested in Microsoft a decade ago, you're probably feeling pretty good about your investment today.
A $1000 investment made in February 2014 would be worth $11,326.86, or a gain of 1,032.69%, as of February 9, 2024, according to our calculations. This return excludes dividends but includes price appreciation.
Compare this to the S&P 500's rally of 178.12% and gold's return of 54.15% over the same time frame.
Looking ahead, analysts are expecting more upside for MSFT.
Microsoft’s second-quarter results gained from strong Intelligent Cloud and Productivity and Business Processes revenues. Productivity and Business Processes revenues rose due to a strong adoption of Office 365 Commercial solutions. Microsoft 365 Consumer subscribers grew to 78.4 million. Continued momentum in the small and medium businesses, frontline worker offerings and a gain in revenue per user drove the top line. Intelligent Cloud revenues were driven by growth in Azure and other cloud services. Solid adoption of Azure AI, which now has a clientele of more than 53,000 customers holds promise. However, Office's declining commercial licensing has been a headwind due to the continued customer shift to cloud offerings. Higher operating expenses and spend on Azure enhancements amid stiff competition in the cloud space remains a concern.
Shares have gained 7.66% over the past four weeks and there have been 15 higher earnings estimate revisions for fiscal 2024 compared to none lower. The consensus estimate has moved up as well.
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