It’s time to breakdown another big technology name. Here is the breakdown on $MSFT, otherwise known as Microsoft.
Current Price: $242.82
52/Wk High: $245.92
52/Wk Low: $132.52
Market Cap: $1.8 Trillion
Dividend: $2.24 / 0.92% Yield
Read below for the breakdown!
Microsoft ($MSFT) is a major technology company with a wide array of products that span business, education, and entertainment.
Breaking down Microsoft’s stock according to TREFIS (@trefis) data, 36.3% of Microsoft's stock price is based on their Productivity and Business Processes segment.
Furthermore, 36.3% is based on the Intelligent Cloud segment, 23.6% on the Personal Computing segment, and 3.8% on cash.
Due to the COVID-19 pandemic, the work from home trend has led to growth among many Microsoft products, leading the stock on a 28.68% rally over the past year.
In recent news, Microsoft beat Q2 2021 expectations with an EPS of $2.03, better then the analysts consensus estimate of $1.64. On a year over year basis, EPS improved 34.44%.
Revenues continued to increase as well, with revenues totaling $43.1 billion for Q2, representing a 17% increase on a year over year basis.
Management reported solid bookings growth as well, with commercial booking growing by 31% throughout the second quarter.
As for income, Microsoft management reported an operating income of $17.9 billion, representing an increase of 29% while net income also increased 33% to $15.5 billion.
Breaking down revenues, the Productivity and Business Processes segment turned out $13.4 billion (Up 13%) in revenues while the Intelligent Cloud segment produced $14.6 billion (Up 23%) in revenues and the Personal Computing segment turned out $15.1 (Up 14%) in revenues.
Furthermore, below are the revenue gains on a year over year basis for substantial sub segments;
Office Commercial: 11%
Office Consumer: 7%
Dynamics Products & Cloud Services: 21%
Server Products & Cloud Services: 26%
Window OEM: 1%
Windows Commercial Products & Cloud Services: 10%
Notable product segments such as the Xbox content and services revenues also saw a major boost throughout Q2, increasing a strong 40% on a year over year basis. Other notable segments saw stellar revenue growth as well, with Azure seeing a 50% increase in revenues.
Management was upbeat about the quarter.
“What we have witnessed over the past year is the dawn of a second wave of digital transformation sweeping every company and every industry,” CEO Satya Nadella said.
Leadership is bullish on the future as well, expecting the following for Q3 revenues.
Productivity & Business Processes:
$13.35 Billion to $13.6 Billion
$14.7 Billion to $14.95 Billion
$12.3 Billion to $12.7 Billion
Shifting into the balance sheet the numbers are solid.
Total Debt: $72.041 Billion
Total Liabilities: $173.901 Billion
Total Assets: $304.137 Billion
Cash & Short Term Inv: $131.968 Billion
When it comes to valuation Microsoft does trade at a premium.
Price to Earnings: 36.31x
Forward Price to Earnings: 30.14x
Price to Sales: 11.99x
Price to Book: 14.14x
Price to Cashflow: 13.92x
Price to Free Cash Flow: 53.08x
Management continues to do an excellent job.
Return on Equity: 42.70%
Return on Assets: 17.48%
Return on Invested Capital: 22.32%
Given the numbers the analysts are bullish with a mean price target of $280.18/share, representing a 15.39% upside.
It is also important to note that the high price target is $315.00/share, representing a 29.73% gain, while the low price target is $245.00/share, representing a 0.09% gain.
The big money is quite involved as well with 69.76% of Microsoft being owned by institutions. Top holders include The Vanguard Group, BlackRock Institutional Trust, and State Street Global Advisors.
On a technical basis, Microsoft is bullish as well. According to the six-month charts the MACD is moving to the upside with strong momentum within a range of 6.45 down to 5.61.
The six-month charts are also indicating an RSI of 67.16 and CCI of 82.12, both of which are on the high end.
In short, Microsoft ($MSFT) is a strong company with consistently growing earnings, a growing industry, and an excellent management team that continues to lead Microsoft to success.
EAT - SLEEP - PROFIT
Disclaimer: This is not direct financial advice, simply an opinion based on independent research.