Shares of Microsoft MSFT have cooled off over the past three months after a strong start to 2019. Despite the roughly sideways movement since July, Microsoft stock has crushed all of the FAANG stocks over the last 12 months as the historic firm proves it is one of the most solid investments in tech.
The Simple Pitch
Microsoft doesn’t need much of an introduction. The company, which rose to prominence on the back of its widely successful Windows and Office suite, has expanded recently through its cloud-computing business. The cloud is arguably the biggest buzz word in all of tech. Yet, Microsoft stands out in an ever more crowded space. The Redmond, Washington-based company is now the second-largest could computing firm behind only Amazon AMZN.
MSFT’s legacy businesses have evolved and it has grown through acquisitions as well. This includes 2016’s purchase of business-focused social media platform LinkedIn, which saw its revenue jump 25% last quarter. More recently, Microsoft last June bought open-source software power GitHub in a move that could play a vital role for years. Overall, the firm is highly diversified, from software to hardware, and remains as crucial to businesses, governments, and individuals around the world as ever.
As we mentioned at the top, MSFT stock has easily outpaced Facebook FB, Apple AAPL, Amazon, Netflix NFLX, and Google GOOGL over the last 12 months. Shares of Microsoft have climbed 21%, which tops second-place Facebook’s 13% jump. The firm has seen its stock price skyrocket 138% in the past three years, against its industry’s 33% climb and Apple’s 96% expansion.
MSFT stock is down 1% over the last month, which comes above the S&P 500’s nearly 2% downturn as global and U.S. economic slowdown worries ramp up. Microsoft closed regular trading Thursday at $136.28 per share, down roughly 4% off its 52-week highs.
Moving on, Microsoft is currently trading at 24.9X forward 12-month Zacks Consensus Earnings Estimates. This rests right at its one-year median and represents a discount against its industry’s 26.4X average. Plus, shares of MSFT have traded as high as 29.9X over the last three years.
Along with its solid valuation picture, which looks even better considering MSFT’s climb, the firm announced on September 18 that it raised its quarterly cash dividend by 11% and approved a new stock buyback program. The new $0.51 a share dividend will be payable on December 12 to shareholders of record on November 21.
MSFT’s current annualized (new will be $2.04) dividend of $1.84 offers a 1.37% yield, which rests not too far off the 10-year U.S. Treasury note’s yield of 1.53%. Plus, the board approved a new $40 billion share repurchase program that will see it return more value to shareholders.
Q1 & Fiscal 2020 Outlook
Looking ahead, our Zacks Earnings Calendar projects that Microsoft will release its first quarter fiscal 2020 financial results on October 23. The firm has not announced an official date just yet, but it issued Q1 results on October 24 last year.
MSFT’s Q1 revenue is projected to jump 10.8% from the year-ago period to reach $32.23 billion, based on current Zacks Consensus Estimates. This would come on top of Q1 2019’s 19% sales growth and come within striking distance of Q4’s 12% revenue expansion.
The firm’s fiscal 2020 revenues are then projected to surge 11.2% to reach $139.88 billion, with fiscal 2021 expected to jump 10.5% higher to hit $154.50 billion. Investors should note that this would mark a slowdown compared to 2019 and 2018’s 14% full-year growth. However, MSFT’s 2020 and 2021 revenue estimates would crush 2017’s 6%, 2016’s 2.6% downturn, and 2015’s 7.8% jump.
MSFT’s adjusted quarterly EPS figure is projected to jump 9.7% to hit $1.25 per share. The tech power’s full-year earnings are then expected to climb 10.1% and 12.8%, respectively. On top of that, Microsoft has seen its Q1, Q2, fiscal 2020 and 2021 earnings estimates surge since it reported its Q4 results.
Microsoft’s earnings revisions trends help the company earn a Zacks Rank #2 (Buy) right now. The firm also boasts “B” grades for both Growth and Momentum in our Style Scores system. With all of this in mind, the only company currently in the $1 trillion-dollar market cap club looks like a strong, stable stock for investors to consider as the global economic picture becomes more worrisome.
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Click to get this free report Amazon.com, Inc. (AMZN) : Free Stock Analysis Report Netflix, Inc. (NFLX) : Free Stock Analysis Report Facebook, Inc. (FB) : Free Stock Analysis Report Alphabet Inc. (GOOGL) : Free Stock Analysis Report Apple Inc. (AAPL) : Free Stock Analysis Report Microsoft Corporation (MSFT) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research