Why Microsoft's Surging Stock Performance Signals Good News Ahead
Microsoft Stock - A Deserving Run
Microsoft's stock continues to soar, and the rally looks completely justified. Microsoft (NASDAQ: MSFT) is part of the 'Magnificent Seven,' a term first used by Bank of America analyst Michael Hartnett to describe seven massive tech-focused companies. Nvidia, Meta Platforms, and Amazon (which are also Magnificent Seven companies) have outperformed Microsoft so far this year. But Microsoft could be an even better buy going forward.
Hiding in Plain Sight
It's human nature to want a good deal, whether buying something on sale, taking advantage of a promotion, or scoring a low interest rate. Sell-offs in the stock market happen all the time, and investors who take advantage of those deals have historically done very well.
- Microsoft was on the sidelines when acronyms like FANG for Facebook (now Meta Platforms), Amazon, Netflix, and Google emerged to highlight the market's growth stocks.
- Microsoft's new all-time high stands out as one of the more deserving runs from a big growth stock.
Rapidly Monetizing AI
On March 13, Microsoft announced Copilot for Security will be generally available worldwide on April 1, 2024. In its second-quarter fiscal 2024 earnings call, Microsoft said it had over 1 million Copilot for Security customers.
- Copilot for Security joins a growing list of Copilots offered by Microsoft, including AI solutions for various sectors.
- Successfully leveraging AI has accelerated Microsoft's growth in its business-to-business and business-to-consumer sales channels.
A Rock-solid Foundation
Microsoft's growth has been the main contributing factor to the stock's incredible run. But an often-overlooked part of the investment thesis is its capital return program and balance sheet.
- Microsoft pays more dividends than any other U.S.-based company and has a strong balance sheet despite increasing expenses.
- Microsoft's stock-based compensation strategy has attracted top talent while driving higher profits and offsetting expenses through buybacks.
Separating a Company from Its Stock Price
Despite a high P/E ratio and fears of overvaluation, Microsoft's diversified business, strong market positioning, and clear AI roadmap indicate sustained strength in the broader market.
Microsoft isn't a cheap stock, but it has risen for all the right reasons, instilling confidence in its future performance and market strength.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.