It’s time to breakdown one of the most well-known names within the market today. Here is the breakdown of $MSFT better known as Microsoft.
Current Price: $222.61
52/Wk High: $232.86
52/Wk Low: $132.52
Market Cap: $1.7 Trillion
Dividend: $2.24 / 1.01% Yield
Read below for the breakdown.
Microsoft is one of the most well-known companies in the world with a hand-dipped in almost anything related to technology.
Microsoft is a technology company that develops software products, services, and devices like the Xbox and Surface line ups.
Breaking down the stock price according to TREFIS (@trefis) 36.42% of the price is based on Microsoft’s Intelligent Cloud segment.
Furthermore, 36.10% is based on the Productivity and Business Processes segment, 22.7% their Personal Computing segment, and 4.8% the company’s Cash and or Net of Debt.
As for recent news Microsoft hit headlines recently with the release of the new Xbox lineups, which has seen outsized demand since their inception and could create an earnings boost in the coming quarters.
On the competition side of things, Microsoft is still mostly unrivaled, but with the recent acquisition of Slack by Salesforce, the company will see much more competition in the years to come.
Shifting into the numbers Microsoft beat Q1 expectations with an EPS of $1.82, much better than the expected EPS consensus estimate of $1.54. On a year over year basis, the Q1 EPS result represents 31.88% growth.
As for revenues, Q1 2021 revenues totaled $37.2 billion, representing a 12% increase since Q1 of 2020. Furthermore, operating income increased by 25% to a whopping $15.9 billion and net income totaled $13.9 billion, representing a 30% increase.
Further digging into revenues, the Productivity and Business Processes segment reported $12.3 billion in revenues, representing 11% growth year over year.
Not only that, but the Intelligent Cloud segment saw $13.0 billion in revenues (up 20%), and the Personel Computing segment saw $11.8 billion in revenues (up 6%).
Management was upbeat about the quarter.
“We are innovating across our full modern tech stack to help our customers in every industry improve time to value, increase agility, and reduce costs,” CEO Satya Nadella said.
As for guidance Microsoft management is bullish with their expectations below.
(Photo source from earnings presentation on Microsoft website.)
Shifting into the balance sheet the numbers are rock solid.
Total Debt: $73.719 billion
Total Liabilities: $177.609 billion
Total Assets: $301.001 billion
Cash & Short Term Inv: $137.977 billion
While the numbers are great the valuation is a bit expensive.
Price to Earnings: 36.16x
Price to Sales: 11.52x
Price to Book: 13.74x
Price to Cash Flow: 25.55x
Management has done a solid job, with leadership continuing to outperform.
Return on Equity: 41.40%
Return on Assets: 16.38%
Return on Invested Capital: 21.03%
Given the numbers the analysts are bullish with the mean price target sitting at $250.76/share, representing a 12.67% upside.
It is also important to note that the high price target is $272.00/share, representing a 22.21% gain, while the low price target is $235.00/share, representing a 5.58% gain.
The big money is also quite involved with 69.85% of Microsoft being owned by institutions. Top holders include The Vanguard Group, State Street Global Advisors, and Fidelity Management & Research.
On a technical basis, Microsoft could be flashing opportunity. According to the six-month charts, the MACD is trending sideways with minimal momentum around 1.99.
The six-month chart is also indicating an RSI of 57.97 and CCI of 92.25, both of which are more neutral than anything. It is important to note that Microsoft has seen an increase of late and a minimal pullback is not out of reach.
In short, Microsoft is a solid pick not only for 2021 but many years to come given consistent growth across all segments and the future of technology.
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Disclaimer: This is not directly financial advice, simply an opinion based on independent research.