If you had to go with one "big tech" stock right now to allocate a significant amount of capital towards, you’d be hard-pressed to find a better option than Microsoft (NASDAQ:MSFT)
. It’s a company that has seemingly been around forever yet continues to innovate and come up with new ways to drive growth. As a dominant force in the technology world, Microsoft has built a truly impressive business model and there are plenty of reasons to believe that there are more good things to come for the company.
Whether you already own Microsoft or you are interested in adding shares now, we’ve put together a list of 3 reasons why it’s a stock that belongs in your portfolio. Microsoft’s Cloud Business is the Future
Microsoft is the world’s largest software company that is best known for productivity and business process products such as Windows and Office in addition to its personal computing devices. Its products are used by businesses around the world and it’s safe to say that it is a company with a dominant market position. With that said, the company’s CEO Satya Nadella has pivoted the company towards a cloud model that is very likely going to take Microsoft into a new era of success.
More companies and enterprises are moving into the cloud with every passing day, and Microsoft
is well-positioned to take advantage of the digital transformation of the business world. The company has roughly doubled its market share to 17% in the public cloud infrastructure business over the past few years and that market position should only get stronger given the company’s momentum and competitive advantages. In Q2 21, Microsoft’s Azure revenue notably grew by 50% year-over-year and helped to drive Intelligent Cloud revenue to $14.6 billion, representing 23% year-over-year growth. The bottom line here is that the company’s revenue from cloud versions of Office, cloud-based businesses like LinkedIn, Bing, and Xbox-Live, and the aforementioned Azure will drive Microsoft’s growth for years to come. In the News for All of the Right Reasons
Another strong reason to consider adding shares of Microsoft at this time is that the company has been in the headlines for all of the right reasons lately. First, you have news that Microsoft is in exclusive talks to acquire messaging platform Discord Inc. for $10 billion. While the deal isn’t set in stone, the move would be huge for Microsoft
as it could help the company to finally become the true leader in videogames. Discord saw its monthly active users double last year to 140 million and is a platform that is heavily favored by gamers. Just think about all of the data and information that Microsoft could use from the platform to take their video games to the next level.
Microsoft was also in the news this week after the company announced that it won a U.S. Army contract for augmented reality headsets that could be worth up to $21.9 billion over 10 years. This is big news as it shows the company is continuing to generate revenue from its innovative product research. The headsets will be based on the company’s HoloLens augmented reality technology, which enables users to see holograms that are overlaid over their actual environments. These are the types of headlines that should give investors extra conviction in buying shares and confirm that Microsoft truly is a one-of-a-kind business. Strong Technicals and Lower Volatility Than Other Technology Stocks
Whenever you have several fundamental reasons for buying a company like Microsoft and the stock’s technicals line up as well, it’s a match made in heaven. That’s the case with Microsoft stock at the moment, as the stock broke out from over a month of consolidation on above-average volume this week. Microsoft stock is also back above all of the major moving averages after the recent bout of weakness in tech stocks, which is another good sign that higher prices might be on the way.
It’s also worth mentioning that Microsoft is a great tech stock for long-term investors because it is less volatile than all of the FAANG
stocks. With a beta of 0.79, you can rest easy knowing that you own a tech stock with massive upside that won’t be as susceptible to some of the large price swings that we have recently seen in the market. Microsoft is expected to report its Q3 earnings on April 27th and it wouldn’t be all that surprising to see the stock hit new all-time highs in anticipation of the release.
Before you consider Microsoft, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Microsoft wasn't on the list.
While Microsoft currently has a "Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.
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