Microsoft Corporation - NASDAQGS:MSFT - Comprehensive analysis
We are highlighting wide-moat Microsoft as one of our top technology stocks, as shares appear attractive relative to our fair value estimate of $490 per share. We believe the stock is well-positioned for 2025, following relatively stagnant performance over the past 12 months. Our long-term thesis focuses on the expansion of hybrid cloud environments, the growth of artificial intelligence, and Azure. The company continues to leverage its on-premises dominance, allowing clients to transition to the cloud at their own pace. Our growth assumptions are centered around Azure, the migration to Microsoft 365 E5, and traction with the Power Platform for long-term value creation. With its leadership in the public cloud through Azure, partnership with OpenAI, and unmatched distribution capabilities, we view Microsoft as a current leader in AI and expect it to maintain this position in the coming years. We anticipate a catalyst in accelerating Azure revenue in the second half of fiscal 2025, which we believe investors will welcome after capacity constraints limited growth, impressive as it was, over the last several quarters. Given early demand signals, strong AI revenue traction, and the significant success of similar Azure investments over a decade ago, we believe the current wave of capital expenditure investments will benefit both the company and its investors. Microsoft’s ability to maintain margins despite increasing Azure investments, challenges from the Activision acquisition, and accounting changes for server depreciation is noteworthy. We believe this positions the company well for margin improvement as Azure capacity comes online, which should alleviate these pressures and drive multiyear margin expansion.
Free evaluation through quantitative algorithms Microsoft Corporation - NASDAQGS:MSFT
Growth-Scoring Model Detail
Total Revenue Growth Over Prior Year | 15.04 | Market 88 Sector 75 |
Gross Profit Growth Over Prior Year | 14.48 | Market 80 Sector 69 |
EBITDA Growth Over Prior Year | 20.9 | Market 81 Sector 66 |
EBITA Growth Over Prior Year | 19.07 | Market 78 Sector 65 |
EBIT Growth Over Prior Year | 17.09 | Market 73 Sector 62 |
Earnings from Cont. Ops. Growth Over Prior Year | 12.37 | Market 61 Sector 57 |
Net Income Growth Over Prior Year | 12.37 | Market 61 Sector 57 |
Normalized Net Income Growth Over Prior Year | 12.68 | Market 66 Sector 53 |
Diluted EPS before Extra Growth Over Prior Year | 12.2 | Market 60 Sector 55 |
A/R Growth Over Prior Year | 12.51 | Market 79 Sector 67 |
Inventory Growth Over Prior Year | -43.72 | Market 1 Sector 4 |
PPE Net Growth Over Prior Year | 47.4 | Market 99 Sector 92 |
Total Assets Growth Over Prior Year | 13.46 | Market 87 Sector 74 |
Tangible Book Value Growth Over Prior Year | 77 | Market 92 Sector 87 |
Common Equity Growth Over Prior Year | 27 | Market 91 Sector 81 |
Cash from Ops. Growth Over Prior Year | 22.3 | Market 78 Sector 57 |
CAPEX Growth Over Prior Year | 58 | Market 96 Sector 83 |
Dividend per Share Growth Over Prior Year | 10.49 | Market 84 Sector 95 |
Levered Free Cash Flow Growth Over Prior Year | -10.56 | Market 28 Sector 27 |
Unlevered Free Cash Flow Growth Over Prior Year | -10.01 | Market 27 Sector 26 |
Profitability-Scoring Model Detail
Gross Margin % | 70 | Market 85 Sector 74 |
SG&A Margin % | 12.54 | Market 46 Sector 14 |
EBITDA Margin % | 55 | Market 92 Sector 98 |
EBITA Margin % | 47.2 | Market 96 Sector 98 |
EBIT Margin % | 45 | Market 96 Sector 99 |
Earnings from Cont. Ops Margin % | 35.4 | Market 96 Sector 97 |
Net Income Margin % | 35.4 | Market 96 Sector 97 |
Net Income Avail. for Common Margin % | 35.4 | Market 97 Sector 97 |
Normalized Net Income Margin % | 27.3 | Market 97 Sector 98 |
Levered Free Cash Flow Margin % | 19.84 | Market 77 Sector 77 |
Unlevered Free Cash Flow Margin % | 20.5 | Market 74 Sector 76 |
Return on Assets % | 14.65 | Market 93 Sector 96 |
Return on Capital % | 19.48 | Market 89 Sector 95 |
Return on Equity % | 34.3 | Market 81 Sector 93 |
Return on Common Equity % | 34.3 | Market 80 Sector 92 |
Total Asset Turnover | 0.52 | Market 53 Sector 42 |
