Microsoft Corp (MSFT)

Co-Pilot is a show-me story, but Azure growth is real. Likes it under $400.

He has rotated into Microsoft which fell from $550 to $400. In terms of software, the baby is being thrown out with the bath water. He doesn't expect AI to show profit in the next quarter, but like MSFT long term.

Folks -- every time you get this name trading ~21x PE and growing ~19%, please buy it. Fears of overspending, and will it get a proper return? Most recent quarter saw Azure growing at 39% (which missed the whisper # of 40%). 

Concentration risk -- 45% of commercial backlog is tied to OpenAI. Concerns about Gemini and Anthropic, but he thinks leadership will go back and forth. This one will be hot again.

Steady quarter -- EPS up 28%, revenue up 17%, commercial bookings up 230%. He sees the business accelerating. Yield is 0.90%.

Great entry point. Trading at only 22x PE. You get 15% revenue growth and EPS growth. Caught up in the "show me the ROIC" story. Capex continues to increase dramatically. About 39% Azure revenue growth last quarter (~2% below the whisper number, which always upsets all those fast-money people on the street ;). 

Don't forget about Copilot, ramping up from 15M paid seats to 30-40M over next year or two as people want to increase productivity.

He longer feels that MSFT will be the main beneficiary from AI spending. Their software is prime for disruption. The PE is forecast to be 24x, but he doesn't know what the cap spending will be--it seems to go on.

No concerns about AI for this name. Results reported recently were bang-on. Azure grew 39% YOY. Tremendous backlog and demand from corporate clients. Recent pressure is emotional, not fundamental. Add when opportunities over coming months.

Owns GOOG and AMZN, but not MSFT. All are spending at least $100B this year. It's going to be a show-me story. Investors really want to see if spending will result in future earnings. He thinks it will, but there's a bit of fogginess around that. 

Plus, markets are shifting away from mega-cap tech and putting pressure on some of these names. 

Likes a lot. Latest release saw quite strong numbers and cashflow. People were caught off guard by the capex spend. These large companies with massive cashflows are willing to spend to secure their futures in AI. An overreaction. 

Well run, wonderful business economics, great balance sheet. Valuation attractive. Very much a buy on a pullback.

For him, it's MSFT and GOOG for various reasons. Their cloud services businesses are quite strong. For MSFT, its software businesses and productivity suites are quite attractive. For GOOG, online ad business is phenomenal. The two of them generate more cashflow, and their FCF yields are quite strong.

The street's feeling that MSFT is lagging the AI race is like Alphabet a year ago when the street was saying that Google search was dead. The difference is that it's too soon to say that CEO has "lost the narrative".  MSFT shows a willingness to spend on AI.

Incredibly well run and well disciplined when it comes to capital spending. At the nexus of software, cloud, and AI. Major vendor to every major company everywhere. He forecasts earnings to rise over the next 3 years by at least 50%. Expects it to remain a double-digit grower. Embedded in everything. 

At 24x PE, a great opportunity to buy the best of the best. Yield is 0.92%.

It reported last week. They said they can't keep up with Azure demand and Co-Pilot use is disappointing. Doesn't help that MSFT is still spending a fortune on AI infrastucture. 45% of bookings comes from openAI, which the market no longer considers a reliable customer. Is down 16.5% since reporting. Though, it's more attractive at 24x PE.

Getting tarred with the software brush, but it has so many horses in the race. Used to be all software, but Azure cloud services now make a heck of a lot more $$ than the software side. Lots of partnerships. Potential of $200 to make it to price target in a year. Great opportunity.

Concerns about the software sector, and this name has a significant amount of business there. Often with the Big 7 some fall behind, and then a year later they're at the top of the pack (and something else has fallen behind). Right now, this is the laggard.

He'd start buying, as good companies don't go on sale that often. Good company, strong cashflow. At a similar multiple to S&P, but with significantly higher growth characteristics.