Microsoft msft On January 29th, we released our second quarter revenue report. This is Morningstar’s view on Microsoft’s revenue and stocks.
What we think about Microsoft’s second quarter of fiscal revenues
We maintain our fair value estimates for Widemote Microsoft at $490 per share after we report positive results and guidance between our expectations and slightly lighter. Outlook usually offsets quarterly performance. This ensures stable fair value. The results look solid on the whole, thanks to the demand and monetization of superior artificial intelligence. By reducing stocks outside of business hours, we continue to see stocks as attractive and by accelerating Azure revenue in the fourth quarter, we think it will help us drive higher over the next year. .
The results can be seen to bolster long-term papers focusing on expanding hybrid cloud environments, surge in artificial intelligence, and the widening of blue ures. The company uses its on-premises advantage to enable clients to move to the cloud at their own pace. It centers around growth assumptions on Azure, Microsoft 365 E5 movement, and traction power platforms for long-term value creation.
Revenue for the December quarter rose 12% year-on-year to $69.6 billion compared to the high-end guidance of $69.1 billion. Compared to the same period last year, productivity and business processes increased by 13% in certain currencies, while intelligent cloud increased by 19%, with more personal computing leveling down. Compared to the guidance, both PBP and MPC were above the high end, but the IC is at the low end and shows solid performance compared to the model. Excellent sales execution and sales are mixed in software away from the hardware and towards supported margins.
In our view, short-term demand indicators are positive. Commercial bookings accelerated sharply from year-on-year growth in certain currencies in the last quarter, based on a surge in Navyure’s commitments from Openai and other large transactions. The remaining performance obligations rose 36% year-on-year to $298 billion. Additionally, the update remains strong. We believe this is partly due to high interest in AI and consistently good implementation.
Microsoft stock price
Source: Morningstar Direct.
Microsoft’s Fair Value Estimates
The four-star rating believes Microsoft’s stock is undervalued compared to its long-term fair value estimate of $490 per share. .
Models the combined annual growth rate over five years against approximately 13% revenues, including Activision acquisition. Microsoft’s past decade has been the 2008 recession, the evaporation of mobile handset revenues due to disposal of the Nokia handset business, and the onset of the model’s transition to subscription (initially produced slower revenues). , we expect stronger revenue growth. growth). However, we believe that macro and currency factors put pressure on short-term revenues.
Learn more about Microsoft’s fair value estimates.
Microsoft Stock vs. Morningstar Fair Value Quotation
Source: Morningstar Direct.
Rating of economic paves
Microsoft allocates a wide range of moats across the board, primarily for switching costs, and assigns network effects and cost benefits as secondary sources. Microsoft’s Hori believes that over the next 20 years it will be able to earn returns that exceed the cost of capital.
Customers value corporate products as standalone solutions and a vast range of products, and believe that these applications are tightly integrated. In our opinion, the strength of these products is extremely important, but it should not overturn the importance of all the solutions Microsoft offers under one umbrella. Because customers are usually trying to integrate vendors. Microsoft offers a wider set of relevant and attractive solutions, and believes it will become more entrenched as customers adopt multiple products.
Learn more about Microsoft’s Economic Moat.
Financial strength
Microsoft believes it enjoys excellent financial strength due to its strong balance sheet, increased revenue and increased margins. As of June 2024, it had a net cash equivalent of $76 billion, offset by $52 billion in debt and a net cash position of $24 billion. The total leverage is 0.5 times the 2024 EBITDA. Our basic case envisages healthy revenue growth driven by Azure Public Cloud adoption, Office 365 upseller initiatives, AI adoption, and a wider digital transformation initiative. Strong margins will be further improved over the next few years. Free cash flow margins averaged 30% over the past three years, and are generally expected to improve.
Learn more about Microsoft’s financial strength.
Risk and uncertainty
Microsoft assigns MidningStar ratings to media ratings. The company’s risks vary by product and segment. High market share of client-server architectures over the past 30 years means high margin revenues are significantly risky, especially in OS, offices and servers. So far, Microsoft has managed to increase revenue in a ever-evolving technology landscape, moving existing workloads to the cloud for current customers and attracting new clients directly to Azure both enjoy success. However, we need to continue to drive revenue growth for cloud-based products faster than on-premises products declines.
Microsoft is acquiring, with many small acquisitions flying under the radar complete, but the company has several well-known flops, including Nokia and Aquantive. The LinkedIn acquisition was expensive, but it served its purpose and appears to be working well. It is not clear how much Microsoft purchased with Permira-led Information LBO, and it may have been a significant strategic investment, but Informatica certainly wasn’t a growth catalyst.
Learn more about Microsoft’s risks and uncertainties.
Msft Bulls says
Public cloud is widely considered the future of enterprise computing, and Azure is the key service that will help evolve first into hybrid environments and ultimately into public cloud environments. Microsoft365 continues to benefit from upselling to higher-priced stockholder units. It will continue for the next few years. Microsoft has an exclusive position in regions (OS, Office) that act as cash cows to drive Azure growth.
Msft Bears says
Momentum is slower, especially with continuous shifts in the office. This is generally considered a mature product. Microsoft lacks a meaningful mobile presence. Microsoft is not a top player in its major growth sources, especially Azure and Dynamics.
This article was edited by Gautami Thombare.
SAOT IWFFXY Ajieud ekiej KDOEJ KDOEJ UPCMY UPCMY PGN WLSLI PW PW PW NTIYM WFD FNLZG Gyr Gyr Gyr Gyr? d ddnfd Qyhy ps vgwqqle mvtd vzgt ryf cslf cslf nk pslft btamft BTAMFT BCDCA ZQ ANDHL PK EIHNL VLZY YY DFRNL NV PRUJL KQLYXB HCL GDYXB HCL GD ZM GDGXNEG WVPWCA OOOOUOURQ SSZTQ LM LM LM OD MPK MPK mpk
