With the NASDAQ trading at all-time highs and tech companies roaring higher seemingly on a daily basis, you might be thinking that there isn’t a lot of value to be found in the tech sector. Many investors aren’t too keen on buying a stock when it is at all-time highs, but there are always exceptions. One company in the trillion-dollar market capitalization club is trading at all-time highs that you could consider adding even at current prices.
Microsoft (NASDAQ:MSFT) has reinvented itself over the last decade and is currently one of the most undervalued tech giants in the market. It’s a business that has a reliable management team and is greatly benefitting from current economic conditions. The Microsoft brand is stronger than ever, and the company continues to make exciting moves that should interest any investor. Let’s take a look at why Microsoft stock still has a lot of upside below.
Rapidly Growing Cloud Business
One of the most intriguing reasons why Microsoft is undervalued at current prices has to do with its rapidly growing cloud business. The company reported massive cloud revenue in Q3 of $13.3 billion, up 39% year-over-year, and it seems that that growth will only continue as more and more businesses look to take their operations into the digital age. Cloud revenue is rolling in for the company in a lot of different ways and more and more companies are moving to cloud infrastructure services. This accelerated demand has a lot to do with the global pandemic and the increased necessity for remote work, but Microsoft’s cloud revenue was on the rise even before that.
The need for cloud computing services has never been greater, which is why some analysts are betting on Microsoft to become the first 2-trillion dollar market capitalization company ever. Amazon Web Services is still the leader in the cloud infrastructure market, but Microsoft Azure is closing the revenue gap quickly. Even if it doesn’t reach the 2-trillion milestone, investors can still expect strong revenue growth from Microsoft’s cloud services going forward thanks to more remote workers and new industries such as healthcare moving towards cloud computing.
Diverse Business Model
When you are buying shares of Microsoft, you can almost think of it like you are buying multiple companies at once. The diversity in Microsoft’s business model is equaled only by Amazon (NASDAQ:AMZN), which is a far more expensive stock from a valuation standpoint. A diverse business model means that Microsoft can continue their growth and profitability even in the direst of economic situations. In fact, Microsoft’s year-over-year revenue growth actually accelerated during the pandemic according to last quarter’s earnings report.
We all know about Microsoft’s computers, and we mentioned Microsoft Azure and it’s rapidly growing cloud infrastructure services. Another important component of its business is the Microsoft Office 365 software which provides a full suite of digital office software solutions. You also have to mention Microsoft’s Teams software, which is helping more and more companies move their workers online so that they can work remotely. Lastly, Microsoft will be dropping their new Xbox videogame system later this year, which many gamers are anxiously awaiting. All of these profitable components to its business model make Microsoft a fantastic addition to any portfolio.
Consistent Dividend Growth
Another bonus for Microsoft shareholders is that they can expect steady dividend growth along with the company’s massive earnings growth. The company has actually raised its dividend by 65% over the last five years, which makes it one of the most attractive dividend growth stocks on the market. Although some investors might not be impressed with a roughly 1% dividend yield, it’s more of a testament to just how much the stock has gained lately.
When you look at the other tech giants like Amazon (NASDAQ:AMZN) and Facebook (NASDAQ:FB), you aren’t even getting dividend payouts. Even Apple (NASDAQ:AAPL), another member of the trillion-dollar market capitalization club, can’t compete with Microsoft’s dividend yield. The fact that you can rely on consistent dividend growth along with huge momentum in earnings growth makes Microsoft one of the best businesses to own in the entire stock market.
Best in Show
Even though it might be hard to pull the trigger on buying shares of Microsoft at all-time highs, it’s still one of the most undervalued of the technology company giants. With the continued growth of their cloud services, diverse revenue streams, and consistent dividend growth, Microsoft looks like it has a lot of room to run going forward.
Featured Article: What is the Consumer Price Index (CPI)?7 Stocks That Still Have Upside For Investors to Buy
It can be fun to invest in some speculative stocks. But it should go without saying that those stocks shouldn’t make up the bulk of your portfolio. In fact, it’s important to find a few good stocks that make up the base of your portfolio. These are momentum stocks that are in a strong uptrend.
One way to find such stocks is to look at the most active stocks (or volume leaders). Shares of these companies are among the most traded or have the highest dollar volume of shares traded in a given trading day.
Any stock may crack this list from time to time (for example, when there’s new news about the company). However, stocks tend to find their way on this list consistently that bear watching. That’s because this list indicates that there is pressure among investors to buy or sell the stock. And that makes an investor’s decision very simple.
And that’s the reason we created this special presentation. The stocks on this list are among the most actively traded stocks on the market today. They also share a similar quality. They are coming off strong years in 2020 and seem to be showing some consolidation for another leg up.
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