Microsoft has been a tech heavy-weight for a long time now. The stock is vulnerable, however, to larger market routes like what has been seen in equity markets over the last few weeks. Microsoft is down about 19 percent since the selling began and could represent an excellent long-term value at current or even lower price levels. The current stock valuation could even be viewed as a sale price, with long-term investors potentially earning larger returns over time.
The Tools for Success
Regardless of what U.S. and global stock markets do in the weeks and months ahead, and regardless of what governments and central banks do to combat the economic slowdown, Microsoft has several key business lines that may keep its stock price afloat or rising. The company’s cloud business, for example, is likely to remain strong as overall demand increases in the months and years ahead. The move into cloud computing and into hardware such as the Surface is likely to continue and Microsoft is positioned to be a global leader in these arenas.
A Bargain
Concerns over the coronavirus and its potential impact on global supply chains has led Microsoft’s trailing price-to-earnings ratio to the lowest level in over a year. The stock’s dividend yield is currently at 1.23 percent. This figure may seem small, but it is fairly robust compared to the almost non-existent yield of the benchmark ten-year note. Unlike many other companies that are currently being pressured by the virus, Microsoft is unlikely to cut its dividend as it is sitting on a large pile of cash. The company could, in fact, do the opposite and raise its dividend payments in order to attract more investors into the stock.
Big Upside
Shares of Microsoft stock could potentially see significant upside from recent levels. Some analysts have even suggested that the stock price could approach the $210 area. A move towards this level would represent an gain of about 36 percent, which is nothing to sneeze at. Combine the stock’s possible upside with the potential for dividends and possibly higher dividends, and an investment around current levels could make a great deal of sense.
The markets have always and will always be dictated by the powers of fear and greed. Buying when others are fearful and stocks are selling off can be a great contrarian play that can provide strong returns over time. The key to such a strategy, be it with Microsoft or any other stock, is to focus on the longer-term, bigger picture. Current volatility and selling may make things a bit uncomfortable, but volatility will return to more normal levels at some point and the selling will eventually subside.