Microsoft (NASDAQ:MSFT) has doubled its share price twice in the past 58 months. I think Microsoft shares will double again by November 2021.
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No takers?
Every once in a while I like to take a risk and make a totally unscientific prediction. Having written about equities for over a decade, I know this is an utterly hopeless exercise. I have no idea where stock prices are headed. And yet, here I am, lobbing a 21-month target price of $336.
How did I find this particular stock price?
If you bought a share of Microsoft five years ago at $42, it took 32 months to double to $84. It then took another 26 months (from December 2017 to January 2020) to double again to $168. The second double took 18.75% less time (6 months) to materialize. So if it takes 18.75% less time to double again, that’s 21 months from today or November 2021.
See, what did I tell you? Unscientific.
However, what is unscientific is why Microsoft shares continue to double.
The FANGs of the world
Everyone loves an acronym.
FANG stocks remain popular with investors. According to BuyUpside.com, if you bought $2,500 each of Facebook (NASDAQ:Facebook), Amazon (NASDAQ:AMZN), netflix (NASDAQ:NFLX) and Alphabet (NASDAQ:GOOGNASDAQ:GOOG) on March 28, 2013, this Investment of $10,000 would be worth $81,478.40 as of March 2. That’s an annualized total return of almost 35%.
If you add Apple (NASDAQ:AAPL) to the list, your Investment of $10,000 FAANG ($2,000 per share) from March 2013, would be worth $75,919.87 today, an annualized return of almost 34%.
Do you want to guess what FAAMG’s annualized total return (you subtract Netflix and add Microsoft) has been over the past seven years? Almost 30%. Not as amazing as FAANG or FANG, but still damn good.
However, there is a double-edged sword for these stocks, which represent a significant portion of the entire US market. When they go down, they really go down. At the end of February, the Lost FANG stocks a total of $177 billion in just two days due to the coronavirus outbreak.
That’s more than Netlflix’s total market capitalization.
Donald Trump’s MAGA actions
I had never heard of this phenomenon until I read about it on CNBC recently. Only, instead of “Make America Great Again”, the initials represent Microsoft, Apple, Google (Alphabet) and Amazon.
From the beginning of the year until February 11, before the markets turned sour, MAGA shares were added $520 billion in market capitalization between them. Until mid-February, MAGAs accounted for about 70% of the S&P 500’s 52-week gain.
I googled MAGA stocks. The earliest reference to these four actions that I could find was in July 2018 in the Financial Times. The author explained how the FANGs were sidelined by this new trillion dollar club, as Trump calls them.
Whichever acronym you choose to follow, I don’t think you can forget about Microsoft. Here’s why.
Microsoft Stock remains a quality game
InvestorPlace contributor Tim Biggam recently reminded investors that the company’s recent 20% correction from its 52-week high of $190.70 was a buying opportunity for deeply oversold stocks.
Shares are also well below levels they were before the last earnings report on Jan. 29. EPS came in at $1.51, beating estimates of $1.32 per share. of $36.91 easily exceeded expectations of just $35.69 billion,” Biggam wrote on March 2.
“It also marked a very impressive 15 consecutive quarters of earnings beatings by Microsoft. Azure cloud growth continues to be impressive, with growth of 62% well above analysts’ expectations of 58%.
There is no doubt that CEO Satya Nadella keeps the company running almost flawlessly.
In January, I discussed the legal dispute that Microsoft had with Amazon over the Department of Defense awarding the $10 billion Joint Enterprise Defense Infrastructure (JEDI) contract to Microsoft, despite the consensus that it was up to AWS to lose.
Nadella continues to grow its cloud business. Microsoft’s victory over Amazon, regardless of what happens in court, suggests businesses of all sizes remain confident in the company’s ability to deliver quality cloud products and services.
A reversal, I noted, would be an opportunity to reload its stock, much like the coronavirus has been. Since opening Feb. 28 at $152.79, Microsoft stock has rebounded 14% as of this writing.
I’m solidly in Microsoft’s corner until he shows me reasons not to be. The coronavirus is not a legitimate reason to sell at this point. It is a resilient stock and will eventually move higher in due course. This does not mean that it will be free from volatility.
Whether you buy FAAMG or MAGA is up to you. Just be sure to include Microsoft in your portfolio. You’ll thank me when it hits $336 in November 2021.
Will Ashworth has been writing about investing full time since 2008. Publications where he has appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger and many others in the US and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. As of this writing, Will Ashworth does not hold a position in any of the aforementioned stocks.
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