Microsoft’s stock (NASDAQ: MSFT) has seen a 12% increase year to date, slightly lower than the 14% rise in the S&P500 index, with shares currently trading at $423 per share, 15% below Trefis’ estimated fair value of $498. Despite this, MSFT stock has shown strong gains of 100% since January 2021, outperforming the S&P 500’s 45% increase over a similar period. However, the stock’s performance has been inconsistent, with returns of 52% in 2021, -28% in 2022, and 58% in 2023, underperforming the S&P 500 in 2022. Trefis’ High Quality Portfolio, consisting of 30 stocks, has consistently outperformed the S&P 500, suggesting a less risky investment option.
In the fourth quarter of FY2024, Microsoft exceeded expectations with total revenues of $64.73 billion, a 15% year-over-year increase driven by growth in productivity & business processes, intelligent cloud, and more personal computing segments. Azure and other cloud services saw a 29% jump in revenue, contributing to the intelligent cloud segment’s growth, albeit below street estimates. Overall, net income rose by 10% year-over-year to $22 billion, with full-year revenues reaching $245.1 billion and net income increasing by 22% to $88.13 billion.
For the first quarter of FY2025, Microsoft is expected to continue its positive trend with estimated revenues of $280 billion. The net income margin is projected to remain stable, resulting in a net income of $98.6 billion and an annual GAAP EPS of $13.28. With a P/E multiple of slightly above 37x, the company is expected to maintain its valuation of $498 per share. The growth in revenues and income across all segments indicates a strong performance outlook for Microsoft in the coming year.
Despite the positive financial performance, Microsoft may face challenges in the uncertain macroeconomic environment, including high oil prices and elevated interest rates. This raises concerns about whether the company will be able to outperform the S&P 500 in the next 12 months or if it will see a repeat of its underperformance in 2022. The volatility in individual stock performance in recent years suggests the importance of investing in diversified portfolios like Trefis’ High Quality Portfolio to minimize risk and maximize returns.
Overall, Microsoft’s stock has shown significant growth over the past year, driven by strong financial results and performance across its key segments. With a focus on cloud services, productivity and business processes, and personal computing, the company is well-positioned to continue its growth in FY2025. Investors looking for stability and consistent returns may find Microsoft to be a reliable investment option, despite potential challenges in the broader economic landscape.
