Opinions
Darren Sissons
Microsoft Corp
MSFT-Q
PARTIAL SELL
Dec 07, 2021
Stock price when the opinion was issued
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Revenue is so consistent. Everything it does is recurring revenue. 18% revenue growth for one of the largest companies on the planet, best recurring revenue model ever built. On the leading edge of everything. Product suite is unbelievable. Stock buybacks. Might well be his favourite Mag 7. Yield is 0.63%.
(Analysts’ price target is $623.23)
Premium contentOne has to look past its high valuation as it trades at 38x earnings and 11x book, but with a ROE of 33% it demonstrates its dominance in the space. Recently reported earnings beat analysts estimates for revenues (by 4%) and EPS (by 9%). Cash reserves are growing, while shares are aggressively bought back and debt is retired. Management reports its strategy to cloud computing and AI are yielding good returns. We continue to recommend a stop at $453, looking to achieve $607 -- upside potential of 16%. Yield 0.6%
(Analysts’ price target is $606.61)12-month price target of $620. Hasn't trimmed, still second-largest holding in his fund. Earnings were very strong, especially coming out of the cloud. So many strong horses in the race. Very strong in AI participation.
Buy in thirds here, under $500, and ~$470.
The company he'd be owning 5 years from now. Partnership with OpenAI is most consequential company of our time. Totally ahead on AI. Absolute beast when it comes to distribution. Wide-reaching tentacles across every Fortune 500 company. Path of least resistance when it comes to adopting AI -- security platform, Office 365, Copilot powered by ChapGPT. Yield is 0.66%.
(Analysts’ price target is $624.70)Premium contentWe reiterate the global computing workhorse as a TOP PICK. With almost three-quarters of the world's desktops using their operating system one can understand how they command a 32% ROE. Its investment into the AI space is paying dividends as cash flow continues to grow as debt is retired and shares bought back. They have just re-worked their partnership with OpenAI (developer of ChatGPT) to include a for-profit agreement for their partner, which should ensure access to their technology for some time to come. We continue to recommend a stop at $453, looking to achieve $625 -- upside potential of 22%. Yield 0.6%
(Analysts’ price target is $625.53)If offers the most diversified distribution of software technology around the world. Not really an AI company, but a distribution platform for the Fortune 5000. Not a compelling bargain today, more of a hold. You have to look long term for 5-10 years -- it will have a role to play, no matter which way the technology goes.
Steady 10-15% earnings growth, and a lot flows through to FCF. Can easily fund a lot of the AI buildout. Can't actually build fast enough to get the GPUs they need to grow the business, so this might be an issue. Azure still growing almost 40% YOY. Multiple not demanding, perhaps even undervalued. He'd buy on any weakness over next couple of years.