Microsoft is now selling for about $40.50 per share on 2/1/2015 , down from $47 just a week ago. What happened? Another earnings report that was poorly received by investors along with a market that is very choppy, to say the least.
If you buy MSFT at the $40.50 price it is clearly a long term play, as in the just completed earnings call future guidance was not what analysts wanted to hear. The stock market seems to like earnings growth right now and anytime a company is the least bit tepid on the guidance, a stock will drop. For patient investors though, Microsoft still pays an almost 3% dividend while you wait for things to turn around later in the year.
Some Good Things On There Way
Microsoft has a lot of businesses that are doing well including Xbox, Office 365, Skype, and Asure. The company is firmly entrenched into the enterprise space and that is not likely to change any time soon despite gains made by Apple. By most accounts, Windows 10 will be a vast improvement over the much maligned Windows 8. It will be coming out later in 2015 and should welcome back many a user who wants to use PC’s and Windows but was frustrated with the latest operating system.
Additionally, we have new Broadwell chips from Intel that will go into many devices that contribute to Microsoft’s licensing income. Whenever the latest chips from Intel are released, product sales go up and income from this should start to be realized in the last half of 2015
A big long term wildcard is the just announced Microsoft HoloLens which looks like it could be Google Glass done right. Virtual reality and augmented reality are, by almost all accounts, something that is sure to change the world when someone figures out how to do it right. Anyone who has used an Oculus Rift or any other VR headset usually comes away extremely excited and now Microsoft has show that they are in the game with something that might really turn out to be viable. If you want to invest in the VR/AR space, Microsoft gives you some of that benefit.
Its clearly not all rosy at MSFT and areas that are lagging include their mobile strategy, their phone business, and their OS licensing business. These areas need work and are what is keeping investors on the sideline. I don’t know what is specifically being done to address these problems but new CEO Satya Nadella is a bright guy and has a much better grasp of where to take the company that Steve Ballmer ever did in my opinion.
Microsoft stock isn’t going to shoot to the moon and on a broad market pullback, it will go down like everything else. But overvalued it is not and for anyone looking to find a stock they can hold on to for a year or more, now seems to be a good time to buy some MSFT.