Microsoft: Don't Give In To Fear Here

Nov. 06, 2022 4:36 AM ETMicrosoft Corporation (MSFT)META8 Comments

Summary

  • Microsoft's cloud-first strategy helped mitigate the significant PC headwinds that impacted its More Personal Computing segment. However, even Cloud was not immune to macro challenges.
  • We assess why MSFT's valuation has likely de-risked its PC segment. But it's still not undervalued. Hence, value compression could still occur if Cloud's momentum is expected to weaker further.
  • We analyze why long-term buyers are expected to robustly hold MSFT's current defense line. Hence, investors should not give in to fears at these levels.
  • Maintain Buy. However, investors should be prepared for near-term downside volatility given the broad de-rating in SaaS stocks recently.
  • I do much more than just articles at Ultimate Growth Investing: Members get access to model portfolios, regular updates, a chat room, and more. Learn More »

Microsoft"s headquarters in Bucharest, Romania

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Thesis

We updated investors in our previous Microsoft Corporation (NASDAQ:MSFT) article to consider waiting for a validated bullish reversal for a more conservative entry.

Unfortunately, the bullish reversal didn't arrive. Instead, it only brought upon bears who correctly anticipated CEO Satya Nadella

Microsoft Cloud Revenue change %

Microsoft Cloud Revenue change % (Company filings)

Azure Revenue change %

Azure Revenue change % (Company filings)

Microsoft Revenue change % and Adjusted EBITDA change % consensus estimates

Microsoft Revenue change % and Adjusted EBITDA change % consensus estimates (S&P Cap IQ)

DXY price chart (weekly)

DXY price chart (weekly) (TradingView)

MSFT NTM EBITDA multiples valuation trend

MSFT NTM EBITDA multiples valuation trend (koyfin)

MSFT price chart (weekly)

MSFT price chart (weekly) (TradingView)

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Disclosure: I/we have a beneficial long position in the shares of MSFT, META either through stock ownership, options, or other derivatives. 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.

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