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Microsoft a Buy on Replacing Amazon as 2nd-Most Valued US Firm
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Amazon.com, Inc. (AMZN - Free Report) had briefly touched $1-trillion market cap in early September, becoming the most valuable tech firm after Apple Inc. (AAPL - Free Report) . But, Amazon erased $68.1 billion in market cap on Oct 26 after the e-commerce giant missed Wall Street’s revenue expectations in the third quarter (read more: Amazon Stock Still Looks Strong Despite Q3 Revenue Miss).
Jeff Bezos’ e-commerce giant saw its shares plummet 7.8% on the final day of trading last week, the stock’s worst drop since Oct 24, 2014. Amazon’s market cap is currently around $803.28 billion, while Bezos lost $11 billion in equity value in the last trading session.
These made tech titan Microsoft Corporation (MSFT - Free Report) the second-largest company in the United States. Microsoft had been the largest company in the late 1998 through early 2000 before the dot-com bubble burst.
Several analysts believe that Microsoft will eventually top the coveted $1-trillion mark as it continues to successfully compete with Amazon in cloud computing, while enjoying gains in cloud computing and its personal computer business.
Microsoft’s Cloud Strategy Pays off
Microsoft’s new strategy, called hybrid computing, in which customers run software in their own data centers but also use cloud services, propelled the company’s cloud-services revenues in the fiscal first quarter.
Its cloud-computing business, called Azure, does find it quite challenging to maintain growth rates as the business approaches an estimated $10 billion in annual revenues. Still, Azure’s growth remains robust as sales rise 76% in the fiscal first quarter.
Microsoft’s Intelligent Cloud segment, which not only includes Azure but also server products, increased 24% to $8.57 billion, up 23.8% year over year. Stifel Nicolaus & Co. analyst Brad Reback added that “this result absolutely shows Microsoft’s hybrid-cloud strength.”
Overall, Microsoft reported first-quarter fiscal earnings of $1.14 per share, which beat the Zacks Consensus Estimate by 18 cents. Revenues of $29.08 billion exceeded the Zacks Consensus Estimate of $27.73 billion (read more: Microsoft Beats on Q1 Earnings, Azure Aids Top Line).
Credit also goes to the company’s CEO Satya Nadella. He took quite a few valuable assets like Microsoft Office and moved them to the cloud and created cloud-hosted software services. This transition boosted profit margin and revenues.
Microsoft is a Solid Buy
The performance of Azure has not only fueled Microsoft’s return to the list of highest valued U.S. public companies but will also help the software giant gain further traction. Thus, the company’s expected growth rate for the current year is 13.1%, higher than the industry’s rise of 9.6%. Microsoft has outperformed the Computer - Software industry so far this year (+25.1% vs +17.1%).
If this wasn’t enough, the Zacks Rank #2 (Buy) company saw 14 earnings estimates moved north in the past 60 days, while none moved south for the current year. The Zacks Consensus Estimate for earnings rose 3.3% in the same period. You can see the complete list of today’s Zacks #1 Rank stocks here.
On the basis of forward 12-month price-to-earnings (P/E) ratio, Microsoft is currently trading at 24.38X compared to the industry’s 27.52X. Moreover, the company is presently trading at the low end of its annual range of 28.07X to 23.65X and below the median of 25.68X. Thus, it has significant upside potential.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Image: Bigstock
Microsoft a Buy on Replacing Amazon as 2nd-Most Valued US Firm
Amazon.com, Inc. (AMZN - Free Report) had briefly touched $1-trillion market cap in early September, becoming the most valuable tech firm after Apple Inc. (AAPL - Free Report) . But, Amazon erased $68.1 billion in market cap on Oct 26 after the e-commerce giant missed Wall Street’s revenue expectations in the third quarter (read more: Amazon Stock Still Looks Strong Despite Q3 Revenue Miss).
Jeff Bezos’ e-commerce giant saw its shares plummet 7.8% on the final day of trading last week, the stock’s worst drop since Oct 24, 2014. Amazon’s market cap is currently around $803.28 billion, while Bezos lost $11 billion in equity value in the last trading session.
These made tech titan Microsoft Corporation (MSFT - Free Report) the second-largest company in the United States. Microsoft had been the largest company in the late 1998 through early 2000 before the dot-com bubble burst.
Several analysts believe that Microsoft will eventually top the coveted $1-trillion mark as it continues to successfully compete with Amazon in cloud computing, while enjoying gains in cloud computing and its personal computer business.
Microsoft’s Cloud Strategy Pays off
Microsoft’s new strategy, called hybrid computing, in which customers run software in their own data centers but also use cloud services, propelled the company’s cloud-services revenues in the fiscal first quarter.
Its cloud-computing business, called Azure, does find it quite challenging to maintain growth rates as the business approaches an estimated $10 billion in annual revenues. Still, Azure’s growth remains robust as sales rise 76% in the fiscal first quarter.
Microsoft’s Intelligent Cloud segment, which not only includes Azure but also server products, increased 24% to $8.57 billion, up 23.8% year over year. Stifel Nicolaus & Co. analyst Brad Reback added that “this result absolutely shows Microsoft’s hybrid-cloud strength.”
Overall, Microsoft reported first-quarter fiscal earnings of $1.14 per share, which beat the Zacks Consensus Estimate by 18 cents. Revenues of $29.08 billion exceeded the Zacks Consensus Estimate of $27.73 billion (read more: Microsoft Beats on Q1 Earnings, Azure Aids Top Line).
Credit also goes to the company’s CEO Satya Nadella. He took quite a few valuable assets like Microsoft Office and moved them to the cloud and created cloud-hosted software services. This transition boosted profit margin and revenues.
Microsoft is a Solid Buy
The performance of Azure has not only fueled Microsoft’s return to the list of highest valued U.S. public companies but will also help the software giant gain further traction. Thus, the company’s expected growth rate for the current year is 13.1%, higher than the industry’s rise of 9.6%. Microsoft has outperformed the Computer - Software industry so far this year (+25.1% vs +17.1%).
If this wasn’t enough, the Zacks Rank #2 (Buy) company saw 14 earnings estimates moved north in the past 60 days, while none moved south for the current year. The Zacks Consensus Estimate for earnings rose 3.3% in the same period. You can see the complete list of today’s Zacks #1 Rank stocks here.
On the basis of forward 12-month price-to-earnings (P/E) ratio, Microsoft is currently trading at 24.38X compared to the industry’s 27.52X. Moreover, the company is presently trading at the low end of its annual range of 28.07X to 23.65X and below the median of 25.68X. Thus, it has significant upside potential.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>