MSFT Stock – Keep Buying Microsoft Corporation at 14-Year Highs
Microsoft Corporation (MSFT) has been on a tear lately, and is regularly setting new highs as it hovers round $41 for the first time since the dot-com days of 2000. MSFT stock is up almost 45% in the past year, double the 21% or so for the S&P 500 in the same period.
As I wrote recently, one obvious catalyst for MSFT has been changes on the executive team, with the promotion of Satya Nadella to CEO in February as the replacement for Steve Ballmer as the leader of Microsoft Corporation.
But musical chairs in the C-suite isn’t enough to lift MSFT stock to 14-year highs … so what’s really going on? After all, this is a company that has been the poster child for “dead money” tech stocks left behind by a shift to mobile technology, social media and the cloud.
Could Microsoft really be back?
I say “yes” — and I think MSFT remains a good long-term buy even at current levels after the run-up in Microsoft stock lately.
MSFT Stock Evolution
The changing of the guard, rather, is the symptom of a deeper organizational change over the past few years — including a massive restructuring unveiled about a year ago that chunked the company into five business units with their own leadership.
Additionally, the purchase of Nokia’s (NOK) devices and services division has helped push the company towards a better mobile hardware footprint and the recent release of Office software for iPhone and iPad has proven that the company is willing to think differently to achieve growth.
Investors have liked what they’ve seen from Microsoft Corporation.
With the crumbling of BlackBerry (BBRY), MSFT is the only legitimate No. 3 in the global smartphone software space — and given its enterprise chops, Windows Phone seems full of potential for business and government use. Furthermore, Microsoft continues to push innovation (or at least imitation) with its Cortana voice-control interface that it contends is better than Apple (AAPL) voice assistant Siri.
Don’t think Microsoft is giving up on its bread-and-butter Windows platform, however. Recently, Raymond James analysts Michael Turits and James Wesman explained why they think MSFT has a good chance of evolving this cash cow and keeping it relevant — starting with the recent BUILD developer conference in San Francisco this week:
“We expect an ambitious, but at the same time dramatically modified, approach in which Windows enables Microsoft applications and services, but remains one of many operating systems and platforms on which those services are delivered.”
In other words, Windows will not be a thing apart, but a software platform integrated into a broader MSFT mission.
What’s the Trade on Microsoft Stock?
As Serge Berger pointed out a few weeks ago, the charts are looking really good for MSFT stock right now. And sentiment continues to be strong.
Throw in a juicy 2.8% dividend yield that is only about 40% of projected earnings and ripe for future increases, and MSFT stock looks increasingly attractive as a long-term bet.
Of course, Microsoft could continue to struggle with its mobile businesses and a pivot away from Windows and Office as self-contained products surely come with risks to both the top and bottom lines. But the reality is that the market has moved away from MSFT making most of its money from Windows licenses on desktop PCs … and there’s nothing Microsoft can do but adapt.
Personally, I’m a long-term bull on MSFT stock. Microsoft has more than $83 billion in cash and a will to survive, so it’s not going anywhere. And with a forward price-to-earnings ratio of about 13.8 even after this big run, it remains fairly valued.
I have faith in MSFT stock. The company seems committed to reinventing itself, even while it boasts a lot of stability and a great dividend.
There might not be a lot of short-term outperformance left after this run, sure … but I wouldn’t hesitate to add to MSFT stock holdings now considering the very favorable product moves and sentiment shift on Wall Street for this tech titan.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at [email protected] or follow him on Twitter via @JeffReevesIP.
Originally posted here:
MSFT Stock – Keep Buying Microsoft Corporation at 14-Year Highs
