Please ensure Javascript is enabled for purposes of website accessibility

How Much Optimism Is Priced Into Microsoft's Stock?

By Motley Fool Staff - May 3, 2018 at 8:31PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares were up more than 40% in the 12 months before its most recent earnings report.

In this segment of the Motley Fool Money podcast, host Chris Hill is joined by senior Fool analysts Jason Moser, David Kretzmann, and Jeff Fischer to discuss Microsoft's (MSFT -0.26%) latest quarterly results, which displayed mammoth revenue.

In the cloud, gaming, and elsewhere, the tech giant is firing on all cylinders. Well, actually, all cylinders but one -- and the Fools consider what its one big weakness means for its future.

A full transcript follows the video.

This video was recorded on April 27, 2018.

Chris Hill: Shares of Microsoft have risen more than 40% over the past year. Maybe that's why Wall Street shrugged after Microsoft's third quarter revenue came in just shy of $27 billion, Jason. And cloud continues to get it done for them.

Jason Moser: Yeah. You have to really love what Satya Nadella is doing for this business. He was such a great hire at such a pivotal time for this company. Cloud, as you mentioned, remains a big opportunity, and I think that makes sense, given the company's installed base on the enterprise side. They continue to grow the business across all three main business segments. Big opportunities in gaming. Obviously, we see Microsoft every day in some shape or form.

I think, if there's one place, one area where Microsoft is weak, and I think this is probably the only place, it's mobile. You don't see mobile really anywhere in their releases. They only mentioned the word five times in the conference call, and even those five times were essentially meaningless. That's a problem in a mobile world. So, when we talk about these companies that are growing so fast, the first company to a $1 trillion market cap, for example, it's not to say Microsoft couldn't get there, but they're going to have a really hard time if mobile is not a part of that strategy.

So, when you put them up to companies like Amazon and Alphabet, the growth rates speak for themselves. Microsoft isn't keeping anywhere close to the pace that those tech giants are, even though they're investing at that same pace. So, good quarter, good business. Just, it's a difficult, difficult space to keep any sort of sustainable competitive advantage.

Hill: Real quick, before we wrap up, since you mentioned the race to a $1 trillion market cap, we have Microsoft and Google just over $700 billion, Amazon around $735 billion. Oh, yeah, there's Apple, $820 billion. Who are you picking in this race? David?

David Kretzmann: Apple has a head start. I'll go with them.

Moser: I've been consistent with Amazon, I'm sticking with it.

Jeff Fischer: I've been inconsistent. [laughs] In the past, I've said Apple, and now I'm leaning Amazon.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors. LinkedIn is owned by Microsoft. Chris Hill has no position in any of the stocks mentioned. David Kretzmann owns shares of Alphabet (C shares). Jason Moser owns shares of Apple. Jeff Fischer owns shares of Alphabet (C shares) and Apple and has the following options: short May 2018 $152.50 puts on Apple. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Microsoft Corporation Stock Quote
Microsoft Corporation
$291.32 (-0.26%) $0.77

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/18/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.