In the fourth quarter of 2021, Microsoft (MSFT) reported excellent growth, with revenue growth of 21% per year. The tech titan’s reaction was as muted after hours as were Apple (AAPL) and Alphabet (GOOGL) (GOOG). The market is a voting engine soon, and Microsoft’s profitability will continue to drive its share over time. In the first quarter of this year, Microsoft’s commercial cloud grew 36% to $19.5 billion a year. The company’s profit margins and EPS numbers are excellent, and its growth rate is 42%.
Microsoft continues to inform investors that it invests and innovates across its entire technology stack. By 2021, Microsoft will be more diverse than ever, with Bing 53% and LinkedIn 46% looking for advertising. In the fiscal year 2022, Microsoft is projected to grow 30% each year. The share price is $10.36 (28x), non-GAAP EPS. For a company that increases its revenue by 30%, having to pay 28 times seems like a good deal.
Microsoft announced extraordinary revenue growth, margin expansion, and a significant increase in EPS in Q4 FY21. Since 2014, the company has been part of the Library Capital portfolio for several years. In December 2020, analysts recommended the purchase of Microsoft Seeking Alpha. The new forecasts show a total return in 2024 (15.3% annualized) of 51%, handsome and deserving of a buy rate. Moreover, Microsoft’s growth remains broad and even accelerated in some industries in the fourth quarter of fiscal year 21.
The majority of Microsoft’s 3-segment companies continued to develop, with only a few hurt by specific causes. Once again, the core Office 365 business demonstrated double-digit annual growth, both in terms of the number of business stations and customers. However, consumption subscriber growth was lower due to a higher comparison in the previous year. In the fourth quarter, Microsoft’s sales increased steadily over the 1920s in its sectors, Productivity and Business Processes and Intelligent Cloud. In the fourth quarter of fiscal year 21, Microsoft’s commercial cloud revenue increased 36 percent year-over-year. In addition, it rose 10 percent sequentially to $19.5 billion.
In More Personal Computing, the revenue growth in Windows Commercial (+ 14%) and Search (+ 49%) was considerable, although special issues affected other companies. Management is optimistic that after the pandemic concludes, robust growth will continue as COVID-19 has steadily accelerated change in many areas. Even after the epidemic, Microsoft’s structural drivers and operational leverage will remain strong. At $286.54, the shares traded in FY21 at 35.8x P/E, while the Free Cash Flow (“FCF”) yield was trading at 1.9%. In the coming years, analysts predict that double-digit revenue growth will continue.
The dividend yield is 0.8 percent, well supporting a dividend payout ratio of less than 40 percent ($0.56 per share per quarter, or $2.24 annualized). Microsoft FY21’s $7.97 actual EPS was 5% higher than our last forecast. Microsoft (MSFT) had an excellent Q1 FY22, with double-digit growth in its Office, Server Products, and Windows business revenues. The projection is that the company will continue to triple its revenues over the next three years. Analysts reiterated Microsoft Corporation’s purchase rating. As of June 2024, an exit price of $421 and a total return of 51% (15.3% annualized) in less than three years is expected.
Microsoft: Gaming, Azure and Office 365 Optimistic
Microsoft (NASDAQ: MSFT) is key to the imagined future of an interconnected world powered by artificial intelligence data to enhance life experience and increase productivity. The company’s market-oriented approach to application development and technology infrastructure enhances its role in this anticipated future. In the short to medium term, revenue winds can be seen on several fronts: Continued growth in Dynamics 365 products, driven by pandemic digitization trends. Demand for Azure solutions increases as more third-party software vendors modify their browser/cloud product deliveries. In Xbox content and hardware revenues, supporting the company’s dominant market share in the gaming console market, analysts see continued momentum.
Microsoft (NASDAQ: MSFT) has a substantial share of the PC market. The corporation’s dominant position as a provider of public cloud services makes it an attractive place to take advantage of this trend. Cloud transformation in the ERP industry is believed to create an opportunity for MSFT at the current market leader SAP (NYSE: SAP). The value of these innovations is estimated to increase by about $2 trillion over the next decade. Microsoft’s Xbox revenue increased 19% in the three months completed in the first quarter of 2021.
All companies experienced double-digit growth in the previous quarter, except Office 365, which increased 5%. Wall Street’s fiscal year 2021 consensus revenue estimates are $166.3 billion for the first three quarters. MSFT needs to produce $44.3 million more than planned to meet its key forecasts. Microsoft’s MSFT quarterly earnings beat analysts’ expectations, but the business has set a high standard for the next quarter. You see robust growth in the coming quarters for Gamming, Azure, and Office 365 and continued long-term trends with the evolution of software and digital delivery. The company also sees Windows 365 as a catalyst for growth, allowing Android and Apple consumers more access to MSFT services.
Microsoft Corporation (MSFT) is one of the highest quality companies you can invest and in. Still, its valuation has risen considerably in recent years. Over ten years, its above-average growth rate should balance this, which is why I still predict solid long-term returns for the company. Stock price gains will depend on two main factors over the long term: MSFT’s ability to increase its earnings per share and changes in its valuation. Microsoft has been growing its margins in recent years. The company has seen its gross and operating margins decline from a very high level a decade ago to a level that is still very attractive but lower between 2011 and 2016.
Over the past five years, MSFT has repurchased around 1% of its shares per year, resulting in an additional 1% earnings per share growth. It’s not much, but it will increase over the years. Microsoft is trading at 34 times this year’s earnings, using a share price of $280 and an EPS consensus estimate of $8.30. Suppose you assume that Microsoft can increase its earnings per share by 9.6% between 2022 and 2031, two-thirds of the 14.4% forecast. In that case, Microsoft will achieve earnings per share of $21.70 in 2031. Equate to a 125% gain over the next decade, with some additional returns from MSFT dividends.
Microsoft Corporation MSFT has been a significant investment for the past five years. Still, the stock will, in all probability, not provide the same return for the next five or even ten years.
Microsoft is known for its development of the Microsoft Windows family of operating systems.
Although the company started as a software developer, it has since evolved into a multimedia and hardware company. Microsoft’s first product was a Zilog Z80 microprocessor compatible with the CP/M operating system. In 1982, the company launched the world’s first personal computer with a graphical user interface, Microsoft BASIC, in 16-bit MS-DOS. Microsoft released the Windows operating system in 1985. Windows 1.0 was the world’s first 16-bit graphical user interface. Windows 1.1 made it available for the Apple Macintosh, and Windows 2.0 was also known for the IBM Personal Computer. Windows 3.0 included the Desktop Window Manager and shipped with the third-generation Apple Macintosh. Microsoft also has a history of shareholder rewards, which is why Microsoft is an excellent choice for an investment right now.