Justin Sullivan
Microsoft’s (NASDAQ:MSFT) CEO Satya Nadella has helped keep the stock in the spotlight this year amid the brouhaha surrounding OpenAI and the long-awaited closure of its deal to buy Activision Blizzard.
The company cut at least 10,000 jobs in 2023 after overhiring during the pandemic, a practice common among tech companies during the period.
Its bet on generative AI through its stake in OpenAI — setting aside the hiccup of founder and CEO Sam Altman’s temporary dismissal from the company — is seen as helping to drive the future forward. Like other tech companies, however, its valuation may be a little too salty for some investors.
2023 Stock Performance
Microsoft (MSFT) is up 54% in 2023. Shares reached a 52-week high of $384.30 in November. On Monday, the stock fell 1.2%.
Over a five-year timeframe, the stock has advanced more than 246%.
What Quantitative Measures say
Microsoft (MSFT) has a Hold rating from Seeking Alpha’s Quant Rating system. This comes in large part due to an F grade in the category of valuation. The stock also receives a C+ for growth.
Countering this somewhat are high grades in other areas. Microsoft (MSFT) receives an A+ for profitability and an A- for momentum.
What Wall Street, SA analysts say
Analysts largely love Microsoft (MSFT). Of the 55 analysts surveyed by Seeking Alpha in the past 90 days, 37 of them have a Strong Buy rating and 13 have a Buy rating.
There are skeptics. Five analysts give Microsoft (MSFT) a Hold rating. It has no Sell ratings.
SA author David Ksir called Microsoft (MSFT) one of the strongest companies in the world, one of only two AAA-rated stocks and one that has substantial AI tailwinds going for it.
“If any stock deserves a premium, it’s Microsoft,” Ksir said.
But the current valuation is extremely stretched with an earnings yield 210 basis points below 10-year treasury yields, the analyst said. “The stock has a poor risk-reward and will only deliver 8% annual returns if growth accelerates by a factor of 2x or if interest rates drop to zero.” The analyst has a Sell rating on the stock.
SA author The Value Portfolio, which has a Buy rating on the tech giant, said that its financial results show strong revenue growth, particularly in its cloud business, though even they admit “its lofty valuation poses a risk.”
Latest Earnings
In its last earnings report, Microsoft (MSFT) reported revenue and profit that topped estimates. Revenue of $56.5B beat the average analyst estimate by $1.95B and GAAP earnings came in at $2.99 per share, beat the estimate by $0.34 per share.
Earnings Predictions
Looking ahead, the market sees Microsoft (MSFT) reporting quarterly earnings per share of $2.75 and revenue of $61.03B.
