As Big Tech seeks to shake off its February and March profanity, stocks like Microsoft hit new highs this week, as the longtime software giant knocks on the door of $ 2 trillion in market capitalization.
The tech-rich Nasdaq ended March just a percentage point higher from the previous two months, unlike the larger S&P 500 which rose nearly 7% over the past two months. the same period.
But the technology appears to be gaining momentum here in April, where Microsoft and Apple are already up 10%, Amazon 9%, Facebook 5%, and Alphabet almost 11%.
In Microsoft’s case, these gains shouldn’t scare you, Fingold says.
“It’s a company that has undergone a complete transformation and it’s in the second act,†said Fingold, senior portfolio manager at Dynamic, who spoke with BNN Bloomberg on Thursday.
“It started out as a PC software-based business and had taken its course. And then they made the transition to a cloud computing and gaming based business, â€Fingold said. “There are very few gaming platforms and it’s a big-scale business, and in cloud computing I really feel like they’ve replaced Oracle as the relational database of choice. for small to mid-size software developers looking to use a relational database as their database. engine behind their software.
The digital transformation underway is floating boats across the tech industry, and that certainly includes Microsoft, which in its most recent quarter saw Azure beat analyst estimates with 50 percent revenue growth. year on year compared to the expected 42 percent. growth. Overall, revenue reached $ 43.08 billion, up 17%, while net profit rose 33% to $ 15.5 billion, with EPS of 2.03 $ per share versus Street’s estimate of $ 1.64 per share. (All figures are in US dollars.)
“What we have witnessed over the past year is the dawn of a second wave of digital transformation sweeping through every business and industry,” CEO Satya Nadella said in the press release of the company’s second fiscal quarter in January.
“Building their own digital capacity is the new motto that drives the resilience and growth of every organization. Microsoft is fueling this change with the world’s largest and most comprehensive cloud platform, â€he said.
Fingold said investors who envision a Microsoft hitting all-time highs shouldn’t worry, saying it’s not only wise to let your winners run, but that the alternative to owning Microsoft – namely, betting on a smaller, less proven software company – doesn’t make sense.
“When we come to the evaluation, that’s the part that’s really important, because we’re not just selling software: it’s not just Microsoft Windows and Microsoft Office. It’s about selling cloud computing services to businesses and software vendors. Microsoft is literally creating a utility, â€Fingold said.
“It’s like Amazon Web Services, where you have this recurring income where people literally have to pay or shut down their businesses. The margin on cloud computing is typically much higher than the margins associated with selling software, so over time the margins and free cash flow generation for Microsoft will increase, â€he said.
“This is why I am not concerned with the valuation as I would really rather pay the price for Microsoft and have a growing business with increasing margins over time than trying to speculate on a software company. cheaper that hasn’t made the transition to the cloud and may not exist in ten years, â€Fingold said.
Wedbush analyst Daniel Ives agrees with Fingold’s idea that Azure is flexing its muscles right now. Ives gave Microsoft a “Buy†rating and a target price of $ 300 at the end of March, saying Microsoft is gaining ground in cloud computing compared to Amazon’s AWS.
Ives says Microsoft Office’s transition to consumer and enterprise markets will add positive winds over the next few years as the company positions Azure and Office to become “the backbone and artery of the cloud.”
“With this highest IT priority, we believe that 85-90% of these cloud deployments have already received the green light from CIOs and healthy cloud budgets already in place for 2021, with [Microsoft] firmly positioned to gain more market share over AWS in this cloud arms race, â€said Ives.
