Café de la Bourse a Microsoft past under the microscope. We are interested in the group’s mission and ambitions, the details of its activities, as well as its financial performance. We also looked at the technical configuration of the Microsoft share price. Find our analysis and our opinion on the Microsoft share.
Microsoft: mission of the American computer giant
Microsoft is a technology company on a mission to empower every person and every organization on the planet to achieve more. The company strives to create local opportunity and impact in every country in the world.
This is partly about providing platforms and tools to improve the productivity of small businesses and partly about offering fast and efficient solutions to support innovation and empower human ingenuity.
In a dynamic environment, digital technology is the key element that fuels global economic output. Organizations of all sizes have digitized critical functions with the desire to create more value while simplifying security and management.
This is where Microsoft concentrates all of its efforts.
What is Microsoft’s current strategy?
To achieve its vision, Microsoft’s R&D efforts focus on three interconnected ambitions.
Reinvent productivity and business processes
Microsoft aims to play a key role in the way the world works and interacts every day. To do this, the company is investing in a suite of tools and services such as Office 365, Dynamics 365 and LinkedIn.
Microsoft is notably the publisher of Microsoft Teams: an all-in-one platform that allows you to facilitate meetings, calls, chat, collaboration and the automation of business processes.
The company also provides Microsoft Viva as an employee experience platform that brings together enterprise communications, knowledge, learning, resources and ideas.
One can also refuse Microsoft Power Platform which helps with robotic automation of processes or LinkedIn, the social network which helps professionals to connect, learn, develop and get hired.
Build a smart cloud
With the acceleration of digital transformation, organizations in all industries around the world are facing challenges that will have a fundamental impact on their success. Microsoft provides an efficient network of cloud computing infrastructures and “data centers” via Azure.
The Microsoft cloud is a complete and reliable cloud that offers good integration of the entire technical stack of IT infrastructures for a well-controlled cost. Microsoft is also investing heavily in self-service AI through Azure SQL database, Azure Synapse, and finally Azure Machine Learning Studio tools to create machine learning models.
Create more personal computing
Microsoft is working to make computing more personal by putting people at the heart of the experience, allowing them to interact with technology in more intuitive and dynamic ways.
Microsoft 365 empowers people and organizations to be productive as they adapt to more fluid ways of working, learning, and playing. Additionally, Microsoft has designed and markets devices to drive demand in the Windows ecosystem. This is mainly the Surface family which includes, for example, the Surface Laptop Studio, Surface Laptop 4, Surface Laptop Go 2, Surface Laptop Pro 8 or Surface Pro X models.
Finally, with three billion people playing games today, Microsoft continues to invest in video game content and its gaming community, notably through the acquisition of ZeniMax Media and its intention to acquire Activision Blizzard. , a leader in game development and publisher of interactive entertainment content.
Microsoft Strengths and Weaknesses
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Microsoft business overview
Microsoft is the world leader in the design, development and marketing of operating systems and software for PCs and servers. Net sales break down by activity as follows
The sale of operating systems and application development tools (46.5% of sales)
This activity revolves around the exploitation of Azure, SQL Server, Windows Server, Visual Studio, System Center, GitHub and also Windows PC operating systems.
Development of applications and software (22.6% of turnover)
This activity refers to the operation of productivity programs (Microsoft 365; Word, Excel, PowerPoint, Outlook, OneNote, Publisher and Access), customer relationship management (Dynamics 365), file sharing and management in online (OneDrive) and collaborative communications (Skype and Microsoft Teams).
The sale of equipment and the publishing of video games (8.2% of turnover)
This business includes Xbox console and accessories and Xbox content and services, including video game content, Xbox Game Pass and other subscriptions, and Xbox Cloud Gaming.
Other (22.7% of sales)
Other activities refer in particular to business consulting services and the sale of computers, tablets and accessories.
Microsoft fundamental analysis
Microsoft’s latest financial results
Microsoft released the results for the quarter ended September 30, 2022 on October 25.
“In a world facing growing headwinds, digital technology is the best ally,” said Satya Nadella, president and CEO of Microsoft.
“In this environment, we are focused on helping our clients do more with less, while investing in secular growth areas and managing our cost structure in a disciplined manner.”
Revenue of $50.1 billion
The group’s turnover amounted to 50.1 billion dollars, an increase of 11% (+16% at constant exchange rates). Microsoft Cloud revenue reached $25.7 billion, up 24% (+31% in constant currency) from the prior year.
Gross margin of $34.6 billion
Gross margin amounted to $34.6 billion, up 9.5% compared to the same quarter of the previous period.
Operating income of $21.5 billion
Operating income amounted to 21.5 billion dollars, up 6% (+15% at constant exchange rates).
Net income of $17.6 billion
Net profit amounted to 17.6 billion dollars, down 14% (-8% at constant exchange rates). Reduced earnings per share were $2.35, down 13% (-7% at constant currency).
Dividend of $0.68 per share
Microsoft declared a quarterly dividend of $0.68 per share. The Microsoft dividend is payable on March 9, 2023 to shareholders of record on February 16, 2023.
Microsoft analysis technique
Graphical analysis of Microsoft stock price
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Source: Café de la Bourse, integrated graph on IG, data for information purposes only
Technical analysis of Microsoft stock
Over the past 12 months, Microsoft shares have fallen 27.7%. The action is not immune to the general decline in technology stocks explained by the rise in key interest rates to fight against inflation.
Microsoft’s stock price starts the year 2022 at the levels of $335, which it will no longer touch. The decline leaves behind a resistance level at $294 (in green on the chart) that Microsoft stock price will test in mid-August.
The $241 support level (in purple on the chart) was reached in June 2022, then broken in September 2022 to test the $209 level (in turquoise on the chart) from which Microsoft stock rebounded.
Microsoft’s stock price is now hovering around the previous support level of $241. The trend is bearish in the medium term with the 50-day moving average (in black on the chart) below the 100-day moving average (in red on the chart), but the trend is rather bullish in the short term.
Indeed, Microsoft’s stock price and the 20-day moving average (in green on the graph) apply above the 50-day moving average. The MACD is positive and below its signal line and the stochastic RSI is in the neutral zone.
Our opinion on the Microsoft share
Microsoft shares have fallen 25% since the start of the year. Will the decline continue? It’s possible. Maybe the economy will continue to weaken. Perhaps the margins will continue to erode. Perhaps competitors will potentially catch up with Microsoft’s dominant cloud position.
However, it’s important to take a step back from Microsoft’s corporate journey.
In its four decades of existence on the stock market, Microsoft has gone through the stock market crash of 1987, the dotcom crash of 2000, the financial crisis of 2007 and finally the COVID crash of 2020 and still multiplied its value 11, 7 times, going from $21 per share in 1986 when it went public to $245 today.
It therefore does not seem excessive to say that Microsoft is a stock for all economic seasons and that it can be interesting to have it in a stock market portfolio.
Image source: Creative Commons – Raimond Spekking
Also find this article on Café de la Bourse
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