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Is Microsoft (MSFT) Stock a Buy at New High?

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Shares of Microsoft (MSFT - Free Report) popped to touch a new 52-week and all-time on Monday. Now the question is should investors consider buying MSFT stock, even at its new high, as the likes of Google (GOOGL - Free Report) and Facebook (FB - Free Report) face more pressure in Washington and Europe?

Recent News

No must-buy news broke about Microsoft Monday, so let’s look at some recent news to help explain why MSFT stock continues to climb.

Microsoft is reportedly scheduled to conduct a major media event in New York City on Tuesday. The event will focus on the company’s new Surface products along with a look into its productivity initiatives. Investors should pay attention Tuesday to see if any significant product or other announcement are made.

At the end of the last week, Microsoft announced a new partnership with Volkswagen that will see the automotive firm utilize MSFT’s Azure cloud and IoT Edge platform as the “technology foundation” for its connected vehicle push. This move highlights the strength of Microsoft’s growing cloud computing and IoT business, as it expands beyond its traditional hardware and software.

Microsoft held 14% of the cloud market last quarter, which was good enough for second-place behind Amazon’s (AMZN - Free Report) 34%. The firm also comes in well ahead of IBM’s (IBM - Free Report) 8%, Google’s 6%, and Alibaba’s (BABA - Free Report) 4%, according to Synergy Research Group.

It is also worth noting that Microsoft’s board approved last week a $0.04 or 9.5% quarterly dividend increase to $0.46 per share, payable on December 13 to shareholders of record by November 15.

Stock Price Movement & Valuation

Moving on, Microsoft has seen its stock price jump roughly 9% since it reported its fiscal fourth-quarter financial results July 19. This movement doubles the S&P 500’s roughly 4% climb and crushes its industry’s sideways movement.

More impressively, shares of MSFT have soared roughly 55% over the last 52 weeks, which tops Apple’s (AAPL - Free Report) 48% and its industry’s 20%. Shares of Microsoft popped over 1% Monday to touch a new all-time high of $115.68 per share.

 

MSFT is currently trading at 26.1X forward 12-month Zacks Consensus EPS estimates, which marks a discount compared to its industry’s 32.6X average. Microsoft has traded as high as 26.9X over the last year but as low as 22.4X, with a one-year median of 24.6X.

Microsoft’s valuation picture appears a bit stretched compared to where it has traded during the last five years. Yet we can see that MSFT still offers a discount compared to its industry. Better still, it looks poised to grow.

 

Outlook

Looking ahead, Microsoft’s fiscal Q1 revenues are projected to jump by 13.5% to hit $27.86 billion, based on our current Zacks Consensus Estimate. Meanwhile, MSFT’s fiscal 2019 revenues are expected to reach $122.41 billion, which would mark a roughly 11% jump.

At the other end of the income statement, Microsoft’s adjusted quarterly earnings are projected to climb by 14.3% to hit $0.96 per share, while its full-year EPS figure is expected to expand by approximately 9.5%.

Microsoft has seen little earnings estimate revision actively recently, which helps it earn a Zacks Rank #3 (Hold). With that said, MSFT stock looks attractive even at its new highs, and might be one to keep an eye on as we inch closer to Microsoft’s Q1 earnings release, due out near the end of the month. 

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