Opinions
Christine Poole
Microsoft Corp
MSFT-Q
TOP PICK
Oct 21, 2024
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.
At the bottom of the Mag 7 on price appreciation, up only 11% this year. Stock's done nothing since last reporting in July. Growth of cloud computing was at low end of expectations, and guidance was also slightly lower. No one likes a company that trades at 30x PE to miss consensus expectations. Company sees growth picking up in back half of next year. Capital spending increased 25% this year as they build out data centres for AI; slated to increase again next year. Being put in penalty box until they can show profitable growth.
(Analysts’ price target is $500.24)A core tech name. Recurring revenue. If growth doesn't materialize, the market will demand that it cut back. It just means they'll have more cashflow from its high operating margins. Strong balance sheet. Good entry point. Yield is 0.8%.