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Microsoft: A Quarter To Remember As The Company Returns To Growth Status

Bert Hochfeld profile picture
Bert Hochfeld


  • Microsoft reported the results of its first fiscal quarter last week.
  • The results were better than had been anticipated and the guidance was better than had been feared. The shares spiked.
  • Microsoft can no longer be considered a value name - it can better be thought of as a name that embodies GARP expectations.
  • The company had many green shoots that were visible in terms of its revenue growth.
  • The company continues to achieve outstanding success in terms of growing Azure. But there are many other cloud businesses that are noteworthy as well.

Microsoft’s quarter-Come on in-the water’s fine

Microsoft (NASDAQ:MSFT), as almost everyone connected with the investment business is aware, announced the results of what was its fiscal Q1 late last week. The results were a significant beat - a blow-out really. The shares responded as might be expected, rising by more than 6% on Friday and are now up by 12% over the past month. I don’t imagine that readers need me to provide a calculation of the gains in MSFT shares. What this article is going to try to do is to synthesize some of the reasons for the success of the company in the last several quarters and to address the question as to whether it can sustain a more rapid cadence of growth. I do hold the shares in my portfolio, but I have different expectations for Microsoft’s share price performance as compared to other, high-growth holdings that I own.

It is important to note at the outset that Microsoft, as opposed to the FANG vendors, is both mature and not really likely to sustain hyper growth. Indeed, Microsoft is perhaps one of the more conservative ways in which to invest in the information technology space. The other day I wrote about Amazon (AMZN), and the difficulty of using normal quantification techniques to value its shares. Microsoft is a different animal. It has and will continue to generate significant levels of reported earnings and cash flow. It does pay a modest dividend, although probably not quite great enough to qualify as an income investment. It does have a substantial capital return program which undergirds valuation, to an extent.

Writing about Microsoft can be a bit complicated. The company operates in so many different segments within the IT space and it reports results in many different buckets that all have

This article was written by

Bert Hochfeld profile picture
Bert Hochfeld graduated with a degree in economics from the University of Pennsylvania and received an MBA from Harvard. Mr. Hochfeld has enjoyed a long career in the tech world, working for IBM, Memorex/Telex, Raytheon Data Systems, and BMC Software. Starting in the 1990s, Mr. Hochfeld worked as a sell-side analyst and won awards from the Wall Street Journal for his coverage of the software space. In 2001, Mr. Hochfeld formed his own independent research company, Hochfeld Independent Research Group, which provided research services to major institutions including Fidelity, Columbia Asset, SAC Capital, and many other prominent institutions and hedge funds. He also operated the Hepplewhite Fund, a hedge fund that specialized in technology investments. Hedge Fund Research, an independent 3rd party firm that specializes in ranking managers, rated the Hepplewhite Fund as the best performing small-cap fund for the 5 years ending in 2011. In 2012, Mr. Hochfeld was convicted of misappropriating funds from a hedge fund he operated. Mr. Hochfeld has published more than 500 articles on Seeking Alpha, all dealing with companies in the information technology space. Highly esteemed for his investment wisdom accumulated over decades, Mr. Hochfeld ranks in the top 0.1% of Tip Ranks analysts for his selection of information technology stocks and their subsequent successes.

Analyst’s Disclosure: I am/we are long MSFT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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