Microsoft (MSFT) investors have had a very unexciting six months as the stock has traded in a narrow $28 to $32 a share range. However, given recent and upcoming catalysts this cheap stock should be ready to break out of its recent doldrums and take its next leg higher.
Positive catalysts for Microsoft:
- The company should announce the first Nokia (NOK) smartphone that will run on Windows 8 in the next week or so.
- Part of the fallout of Apple's (AAPL) recent litigation victory over Samsung will be phonemakers will explore alternatives to the Android operating system from Google (GOOG).
- Samsung (SSNLF.PK) already announced that it will be debuting its first Windows 8 smart phone in the fourth quarter.
- Probably most important, in late October Microsoft will release its Windows 8 operating system and new Surface tablet.
"Microsoft Corporation develops, licenses, and supports a range of software products and services; and designs and sells hardware worldwide." (Business description from Yahoo Finance)
5 additional reasons MSFT is worth more than $30 a share::
- The company has over $50B (Enough to close California's budget gap for the next four years) in net cash on its books which represents approximately 20% of its market capitalization.
- The company has become a consistent dividend payer. The stock yields 2.6% and has grown its dividend payout at better than 14% annual pace over the past five years.
- The company is selling near the bottom of its five year valuation ranged based on P/E, P/S, P/B and P/CF.
- Subtracting cash, MSFT is selling at just 7.5 times forward earnings.
- The stock looks like it has medium term technical support at just under these levels and is solidly over its 200 day moving average (See Chart)