The cloud is yet another reason to buy Microsoft stock

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• Microsoft (MSFT) the stock rallied after the company reported third-quarter results, but fell again.
• With MSFT stock still down around 20% from November 2021 prices, now may be the time to buy on the downside.
• Investors looking for proven long-term growth stocks should consider buying MSFT stocks now, as they remain near the 2022 low zone.

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It slips again, but after Microsoft (NASDAQ:MSFT) released its third quarter results on April 26, MSFT stock had a decent rally. A relatively rare rally for a big tech stock in 2022. However, despite the pop – which saw MSFT gain 7.3% in the days after its third-quarter earnings beat – shares are still down more by 20% in 2022. They are off the November 2021 high close of $343.11 by 29%.

Microsoft stocks were stuck in the doldrums for the first decade and a half of the century. Windows and Office continued to work, but the company wasn’t really innovating. He was finding his feet again after a close call with a government antitrust case that nearly led to the company’s dissolution. Additionally, Microsoft co-founder Bill Gates stepped down as CEO in 2000, leaving Steve Ballmer to lead the company.

Current CEO Satya Nadella took over in 2014, focusing on the cloud. Since then, the MSFT stock has been a steamroller. Even after the 2022 crisis, it has increased by more than 600% since Nadella’s appointment. With stocks feeling the impact of the 2022 market, now would be the perfect time to buy MSFT shares in anticipation of continued long-term growth momentum. This is especially true with how the company’s cloud bets are paying off.

Cloud Growth Opportunities

Shortly after Microsoft released its third quarter results in April, I wrote about the importance of its legacy businesses, including Windows and Office. They tend to be overlooked these days, but still reliably generate great revenue for the business. However, this time I want to focus on the cloud.

One of the highlights of the quarter was Microsoft’s cloud services, including Azure. And it’s an area where CEO Satya Nadella has pushed the company to significantly expand its presence.

Here’s what the company’s CFO had to say about the third quarter: “Continued customer commitment to our cloud platform and strong sales execution led to above-expected commercial bookings growth of 28% and a Microsoft Cloud revenue of $23.4 billion, up 32% year over year. ”

These cloud revenues represent nearly half of the company’s total revenues. MSFT’s overall revenue grew 18% year-over-year, so cloud services are seeing revenue grow at a faster rate than other divisions.

Currently, Microsoft’s Azure ranks second in the world among cloud computing providers, with a 21% market share. Microsoft is slowly but surely increasing its share in a rapidly growing market. Everything from online shopping to remote working to the metaverse continues to drive the demand for cloud computing. This is a market that is on track to reach a value of $947.3 billion by 2026, with a CAGR of 16.3%.

In other words, look to the cloud to fuel MSFT stock growth for years to come.

Microsoft has many complementary lines of business

It’s not just Microsoft’s cloud services that are of interest to investors. This is how the company can leverage Azure and its cloud computing infrastructure to derive more revenue from its other businesses, including legacy products.

For example, you can always purchase a copy of Microsoft Office. But by pushing Office to the cloud and a subscription model, Microsoft is ensuring this cash cow continues to deliver. Now you can access Office documents from virtually any connected device, keeping it relevant. In 2017, Office 365 online generated more revenue than traditional boxed Office products for the first time.

Every business benefits from ongoing subscription revenue that is not tied to purchase cycles or strict hardware requirements. By leveraging the cloud, Microsoft is ensuring that Office – a product first launched in 1990 – continues to be a strong revenue generator.

Another great example is the company’s Xbox games division. One of the main buying propositions for an Xbox gaming console is Microsoft’s strong online gaming capabilities through subscription services like Xbox Live. This has extended to Xbox Cloud Gaming which leverages Azure to bring Xbox Series X quality gaming to mobile devices. Naturally, this also adds to the company’s growing stream of subscription revenue.

Should you buy MSFT shares?

2022 is a tough year, but MSFT stock gets a “B” in Portfolio Grader. Microsoft is a company with a proven track record of innovation. MSFT stock has been posting impressive performance since 2014. It’s been surfing the cloud for momentum not seen since the company’s early days as a PC pioneer.

There may be more difficulties to manage in 2022, but the ability to buy MSFT shares at this price will almost certainly pay off in the long run.

As of the date of publication, Louis Navellier had a long position in MSFT. Louis Navellier has held (neither directly nor indirectly) any other position in the securities mentioned in this article. The InvestorPlace research staff member primarily responsible for this article has not held (directly or indirectly) any position in the securities mentioned in this article.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.