Upcoming products are expected to increase revenue by TipRanks
© Reuters. Microsoft Stock: Upcoming Products Should Increase Revenue
Microsoft (NASDAQ 🙂 is touting a 37.6% price increase since the start of the year, but I’m still bullish on the title. Its forward GAAP P / E is still only 34.2.
Microsoft is the No. 1 company engaged in the $ 533 billion software industry. Microsoft 365, a productivity software suite, has 300 million subscribers.
There are over 1.3 billion active Windows 10 devices. The dominance of Microsoft’s operating system and office productivity suite is why MSFT could rise again before the end of 2021. (See Microsoft stock charts on TipRanks)
Microsoft Office 2021 is here
Microsoft’s most compelling quality of investment is its enduring leadership in on-premises and cloud business software. The next October 5 release of Microsoft Office 2021 could increase the numbers for the second quarter of fiscal 2022.
This latest Office suite is for people who still prefer a one-time purchase of lifetime licensed software products.
The Windows 11 Only TPM 2.0 update on October 5 is free. The downloadable / boxed versions of Microsoft 2021 will cost anywhere from $ 150 to $ 250.
The sale of lifetime licenses for Office 2021 allows Microsoft to serve people and businesses that are not Microsoft 365 subscribers. Note that there are 1.3 billion Windows 10 users, but only 300 million users. ‘paid subscribers to Office 365.
Windows 365 is a new catalyst
Computers that are not TPM 2.0 compliant cannot take advantage of the free upgrade to Windows 11. Instead of purchasing new computers with TPM 2.0 hardware, users can simply rent from Windows 365.
The $ 31 / month Windows 10 version of Windows 365 is reasonable. The PC cloud instance has preinstalled Word, Excel, PowerPoint, Teams, and Outlook.
Going forward, Windows 365 could add $ 3-5 billion in new annual revenue for Microsoft. This estimate could increase if Windows 365 becomes available to regular Windows customers.
Microsoft is undervalued
Microsoft stocks have cheaper valuation ratios than its Software-as-a-Service counterparts. MSFT only has a TTM P / E ratio of 37.1x. That’s lower than Adobe (NASDAQ 🙂 at 51.8x, Autodesk (NASDAQ 🙂 at 48.4x, and Salesforce (NYSE 🙂 at 103.8x.
(Source: Motek Moyen)
MSFT’s lower pricing is unfair. Microsoft claims a net profit margin of 36.5%. Salesforce’s net profit margin is only 10%. Microsoft’s TTM net income is $ 61.3 billion, well above Salesforce’s $ 2.35 billion.
MSFT’s Piotroski F score is 8 which means it is very financially sound and has excellent value.
The Taking of Wall Street
The consensus among Wall Street analysts is that Microsoft is a strong buy, based on 23 unanimous buy ratings. The average MSFT price target is $ 334.55, which implies an upside potential of 11.7%.
Microsof’s relative undervaluation makes it an intriguing investment, as its dominant operating system and office productivity suite virtually guarantees its long-term prosperity.
Disclosure: At the time of publication, Motek Moyen does not have any position in any of the titles mentioned in this article.
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