Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Microsoft (Nasdaq: MSFT) Stock's Forgotten Muscle

Companies / Microsoft Jun 27, 2014 - 11:48 AM GMT

By: Money_Morning

Companies

Michael A. Robinson writes: We've talked a lot about the importance of targeting growth stocks as a great way to become financially independent.

In fact, growth is one of the five rules that my tech-wealth-building strategy uses to identify the best profit opportunities.

But you can't ignore "value" stocks - especially since "special situation" plays such as corporate turnarounds can generate windfall gains for your portfolio.


And today I want to reintroduce you to a slumbering tech giant that is the embodiment of a special-situation value play.

For years, this company was the quintessential growth play, a virtual monopoly whose name was synonymous with sector dominance and investment wealth.

But when its growth phase finally ended, this stock fell off the investment radar.

And it's been locked in investment purgatory ever since. Mainstream investors ignore it altogether - or make jokes about the company's eroding core business, famously nerdy cofounder, and the payback it seems to be receiving for its once-bruising business practices.

But not us. We see the huge profit potential ahead...

Ready for a Comeback

I'm talking, of course, about Microsoft Corp. (Nasdaq: MSFT) - the stock market kingmaker of the 1990s.

With its Windows operating system installed on virtually all of the world's PCs - its market share peaked at about 95% - Microsoft was the personal computer revolution.

Microsoft teamed with chip giant Intel Corp. (Nasdaq: INTC) to create the "Wintel" standard, and the duo's bare-knuckled business practices made the PC market uninhabitable for any other chip-and-software standard.

MSFT stockMicrosoft's dominance didn't stop with operating systems, either. With its Office suite of productivity software, the Redmond, Wash.-based company did nearly the same thing in the applications market.

The result: MSFT stock went on a 9,000% ride during the 1990s.

Even the antitrust watchdogs in the United States and Europe failed to derail the Microsoft Express.

Microsoft continues to dominate the PC market. But the PC market is not the dominant force it once was.

With the "dot-bomb" implosion of 2000, the PC market began to slow. From 2001 to 2011, while the tech-heavy Nasdaq Composite Index gained 34%, Microsoft shares plunged 25%.

The company was caught downright flat-footed as folks began trading their PCs for smartphones and tablets.

And most investors have written the company off - or forgotten about it altogether.

Here's why those investors are making a big mistake...

I think Microsoft is getting ready to stage a comeback. The stock is up 11.5% so far this year, and I believe that's the start of a new, long-term surge.

Its financials continue to be rock-steady and predictable: Revenue and profits increase year after year.

Besides beating the Standard & Poor's 500 by nearly 65% so far this year, this company has been quickly moving into mobile computing and other fast-growing tech segments - especially cloud computing.

And it's made a series of crucial moves - including a bold acquisition and an executive change at the top - that can serve as catalysts for even faster growth. Its $50 billion cash hoard and committed dividend policy give this corporate makeover a lot of credibility.

In fact, I see three very strong catalysts at work ...

Special Situation Catalyst No. 1: The New CEO

Satya Nadella belongs to a very exclusive club. Despite the fact that Microsoft turns 40 next year, Nadella became only the third chief executive in the firm's history when he assumed the top spot in February.

A native of India who grew up and was educated in the United States, Nadella is a 22-year veteran Microsoft executive who has already proven his leadership.

Unlike his predecessors, Nadella is a "people person," which means employees will likely line up behind him. Additionally, he thrives not only on success, but also innovation. That's a necessary quality for a company that's looking to switch its main business - and leap on new businesses that may present themselves in the future.

When analyzing a corporate turnaround, I tend to prefer new blood at the top. And by "new blood," I'm talking about an outsider with no ties to current management. But in this case, the Microsoft board seems to have made a very savvy move.

The new CEO has the full support of cofounder Bill Gates, who at the time of Nadella's appointment gave up his post as chairman of the board to become what Microsoft calls a "technical advisor."

Microsoft and Nadella need to keep their strong ties to Gates. He should be a big help in guiding his company through a tremendous period of change.

While Gates is still wildly popular among the company's sprawling work force, news reports quote workers as saying they know they need to change with the times - continuing the move from software to mobile and cloud computing - to ramp up Microsoft's growth.

In other words, Nadella occupies a rare position in the technology industry. He is both deeply rooted in Microsoft's history and is also seen as a visionary change agent. And he has broad support from the company's roughly 100,000 workers.

Nadella is already carving out an image for himself as a decisive leader and as someone more in tune with the needs of investors.

In late April, he won plaudits from Wall Street when he joined a call with analysts to discuss Microsoft's quarterly earnings. It was the first time in five years that a Microsoft CEO had been present on an earnings call.

Nadella has shown me that he understands the challenges Microsoft faces as the shift away from PCs and toward mobile and the cloud continue.

Special Situation Catalyst No. 2: Cloud Computing

Nadella is an expert in the rapidly growing field of cloud computing. Before becoming CEO, he was the executive vice president of Microsoft's Cloud and Enterprise group. Under Nadella, the unit outperformed the overall cloud market.

Forrester Research estimates that the market for cloud computing services - in which customers pay vendors to host data and applications at remote computer centers they can access via the Web - will hit $55 billion by the end of this year. By the end of this decade, that number will climb to more than $241 billion.

It's a great business to be in... and Microsoft already does well in the cloud.

The information technology research firmGartner recently published its ranking of players in the cloud market. Microsoft's Azure cloud platform came in second place, trailing only Amazon.com Inc. (Nasdaq: AMZN). It beat out tech leaders Google Inc.(Nasdaq: GOOG, GOOGL), Computer Sciences Corp.(NYSE: CSC), andIBM Corp.(NYSE: IBM).

And just weeks ago, Microsoft struck a key partnership with Salesforce.com Inc. (NYSE: CRM). The terms were not disclosed, but the alliance blends Salesforce's popular customer relationship management cloud app platform with Office and Windows.

That should give the cloud business a further boost from its impressive fiscal 2014 third-quarter results. Office 365, a cloud offering, now has an annual run-rate revenue of $2.5 billion and grew sales 100% compared with the year-ago results.
Special Situation Catalyst No. 3: The Mobile Revolution

Microsoft is finally coming on strong in the mobile market.On April 25, the company completed the $7.2 billion acquisition of the Nokia Corp. (NYSE ADR: NOK) device business, a move that makes Microsoft a legitimate player in mobile.

Yes, Nadella's predecessor, Steve Ballmer, made the deal. But it's up to the new guy to make it work.

And he's starting from a solid base. Nokia makes 90% of the mobile devices running the Windows Mobile operating system. And in the first quarter, market researcher IDC said Windows smartphones were in third place, with 3.5% market share.

But IDC says Windows phones will see their market share grow at triple the rate of iPhones and double the growth of Google's Androidoperating system. Windows phones could capture as much as 6.4% of the market by 2018.

Nadella is taking no chances. He's making Windows Mobile free for smaller mobile devices. This is a savvy move, because it makes Microsoft competitive in emerging markets that are still in the early stages of smartphone adoption.

IDC says that Android is now the operating system in 78% of all mobile devices worldwide. So, by copying Google's playbook and making its operating system open source, Nadella hopes to see even greater growth in India, East Asia, Latin America, and the Middle East.

Microsoft (Nasdaq: MSFT) Stock's Forgotten Muscle

Besides its moves into the growing cloud and mobile markets, Microsoft offers us sterling financials. Recently trading at around $41.50, MSFT has a $343 billion market cap and forward price-earnings (P/E) ratio of about 14.5, a slight discount from the overall market. It has operating margins of 34% and a return on equity (ROE) of 27%.

Throw in a 2.7% dividend and you have a stock that offers us an excellent yield and the prospect of continuing price appreciation.

If Microsoft shares just got back to their late-1990s highs in the neighborhood of about $60, we'd be looking for a profit of 40%.

But given Nadella's aggressive plans for mobile and cloud computing, I believe MSFT stock will continue to double the market over the next few years - and that's the minimum we can expect to make from Microsoft.

It's time to cash in...

Source : http://moneymorning.com/2014/06/26/get-ready-to-profit-from-microsoft-nasdaq-msft-stocks-encore/

Money Morning/The Money Map Report

©2014 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in