Repeated strong growth sparks bullish outlook by TipRanks

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Microsoft stock: repeated strong growth sparks bullish outlook

I’m bullish on Microsoft (NASDAQ 🙂 as its high growth rate, significant competitive advantages, and bullish Wall Street consensus round out its reasonable valuation.

Microsoft is an American multinational corporation that produces personal computers, computer electronics, software, cloud computing systems, and other related software. (See MSFT stock charts on TipRanks)

Strengths

Microsoft is considered one of the top five players in the information technology industry in the United States, along with Apple (NASDAQ :), Amazon (NASDAQ :), Google (NASDAQ 🙂 and Facebook (NASDAQ :). It offers flagship products like its Xbox consoles and its line of touchscreen computers, Microsoft Surface.

The company has been a major beneficiary of companies turning to cloud services during the novel coronavirus pandemic. Azure, Microsoft’s cloud computing software, successfully captured a 20% share of the global $ 150 billion cloud market by the end of the first quarter, which ended in September 2020, and continues to grow.

Azure also has the distinction of being right behind Amazon Web Services in terms of global market share.

Recent results

Microsoft reported revenue of $ 46.2 billion, showing 25% year-over-year growth in its fiscal fourth quarter 2021. The company also reported net profit of $ 16.5 billion, up 47% from last year, and earnings per share of $ 2.17, a 49% improvement over last year.

Microsoft’s commercial cloud revenue grew 36% year-over-year to $ 19.5 billion. Azure revenue growth was reported at 51%, surpassing the 30% overall growth of the Intelligent Cloud segment. The company said the growth was due to the growth in cloud service adoption triggered by COVID-19.

Microsoft also reported a 33% increase in revenue from its Dynamic Products and Services segment, including Dynamic 365, which grew 49%. The company’s LinkedIn revenue increased 46%, and Office Commercial revenue increased 25%.

He also pointed out a few weak links, with a more modest increase in Officer Consumer segment revenue of 18%, Surface revenue down 20% and Windows OEM revenue down 3%.

Overall, for fiscal 2021, the company reported revenue of $ 168.1 billion, an 18% year-over-year increase. In addition, net income was $ 61.3 billion, earnings per share was $ 8.05, and operating income was $ 69.9 billion.

Despite some disappointments during the quarter, the company was generally successful and recorded huge earnings and revenue gains.

Assessment measures

Microsoft stock seems reasonably priced, despite its recent good results. Its forward normalized price / earnings ratio is only 34x and its forward price / free cash flow is only 37.2x, two very attractive elements given the recent strong growth and the formidable competitive advantages of which the company benefits.

In 2022 and 2023, sales and normalized earnings per share are expected to continue to grow in double digits.

The Taking of Wall Street

From Wall Street analysts, Microsoft is getting a Strong Buy analyst consensus, based on 22 unanimous buy ratings given over the past three months. The average MSFT price target of $ 336.19 places the upside potential at 14.4%.

Summary and conclusions

Microsoft is a fantastic company that attracts some of the best and brightest minds in tech.

It continues to innovate successfully to maintain its leadership in its business segments and generates extremely strong growth and profitability.

Meanwhile, its share price remains fairly reasonably valued.

Disclosure: At the time of publication, Samuel Smith does not have a position in any of the titles mentioned in this article.

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