Microsoft stock is down 26% year-to-date, is it attractive at current levels?

Microsoft (NASDAQ:MSFT) stock is down about 26% year-to-date compared to the S&P500 index’s 21% decline over the same period. Moreover, at its current price of $244 per share, it is trading 32% below its fair value of $360 – Trefis’ estimate for Microsoft’s assessment. The tech giant beat consensus estimates in the third quarter of fiscal 2022 (fiscal July-June), with total revenue up 18% year-on-year to $49.4 billion. It was driven by 17% growth in the productivity and business process unit, followed by a 26% jump in intelligent cloud and an 11% rise in the personal computing segments. The Productivity and Business Process division primarily benefited from growth in commercial desktop products and cloud services and LinkedIn revenue. Notably, LinkedIn’s growth was driven by higher revenues in the Talent Management Solutions and Marketing Solutions businesses. Along the same lines, smart cloud revenue grew due to higher revenue from server products and cloud services, largely driven by Azure and other cloud services. In addition, the personal computing sector rose due to gains in the windows and search and news advertising sub-segments. Overall, net income improved 8% year-on-year to $16.7 billion.

The company’s revenue increased 18% year-on-year to $168 billion in fiscal 2021, primarily due to an increase in smart cloud activity (up 24 % year-on-year). Additionally, the same trend continued in the first three quarters of 2022, with nine-month cumulative revenue increasing 20% ​​year-on-year to $146.4 billion. This was driven by a 19% increase in the productivity and business process unit, followed by a 27% jump in intelligent cloud and a 13% increase in the more personal computing divisions. Absolutely, the above revenue growth translated into a nine-month cumulative net profit of $56 billion, up 25% year-on-year.

The company has experienced strong growth over the past few years and we expect it to maintain its growth trajectory in the coming quarters. Globally, Microsoft revenue are expected to touch $196.4 billion in fiscal 2022. In addition, MSFT’s net profit margin is expected to remain at about the same level as the prior year, resulting in adjusted net profit of $70.2 billion. dollars and an annual EPS of $9.36. This, coupled with a P/E multiple just above 38x, will lead to a valuation of $360.

Here you’ll find our previous coverage of Microsoft stocks, where you can follow our view over time.

Stock prices have fallen precipitously across all sectors over the past few months and we are now in a bear market for the first time since March 2020, when the Covid-19 outbreak triggered a stock market crash. We capture key Dow Jones trends during and after major stock market crashes in our interactive dashboard analysis,’Comparison of stock market crashes.’

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