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Buy Microsoft (MSFT) Stock on the Dip Amid Apple (AAPL) Uncertainty?

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Shares of Microsoft (MSFT - Free Report) have popped since Christmas Eve. Yet, MSFT stock still rests roughly 10% below its 52-week high after Wednesday’s jump, which saw fellow Dow components, including Apple (AAPL - Free Report) and Intel INTC climb as well. The good news for investors is that Microsoft’s growth outlook appears strong as it expands across cloud computing, IoT, and gaming.

Overview

Microsoft recently reclaimed its crown as the world’s most valuable company. But its run at the top was brief after Amazon (AMZN - Free Report) took over earlier this week. The back and forth and somewhat insignificant fight between Apple, MSFT, Amazon, and Google parent Alphabet (GOOGL - Free Report) for the most valuable firm shouldn’t really matter to investors. It does, however, help show that Microsoft has been able to adapt to the new digital age and looks poised to continue to expand for the foreseeable future.

MSFT grabbed roughly 15% of the cloud market share last quarter, which was good enough for second place behind only cloud behemoth Amazon. The software giant also topped IBM (IBM - Free Report) , Google, and Alibaba (BABA - Free Report) . Plus, the firm boasts some massive cloud clients, including Coca-Cola (KO - Free Report) , FedEx (FDX - Free Report) , Ford (F - Free Report) , Walmart (WMT - Free Report) , and other giants.

Meanwhile, the firm’s Xbox-fueled gaming revenues soared 44% in fiscal Q1 2019. Going forward, the Redmond, Washington-based company’s subscription-based Xbox Game Pass, which has been described as Netflix (NFLX - Free Report) for video games, could help this unit expand amid a booming gaming industry. Plus, CEO Satya Nadella and Microsoft made 15 acquisitions last year, highlighted by its $7.5 billion purchase of open-sourced software platform Github.

Outlook

Looking ahead, our current Zacks Consensus Estimate calls for Microsoft’s Q2 fiscal 2019 revenues to climb 12.2% to reach $32.46 billion. Investors should note that the company’s top-line surged 19% last quarter. More specifically, MSFT’s Intelligent Cloud segment revenues are projected to surge roughly 19% to reach $9.29 billion for the quarter, based on our NFM Estimate—Intelligent Cloud jumped 24% in Q1.

Meanwhile, the firm’s full-year revenues are projected to jump by a similar percentage to reach $124.08 billion. Peeking even further ahead, MSFT’s full-year fiscal 2020 revenues are expected to jump 10% above our current year estimate to reach $136.51 billion.

Moving on, Microsoft’s adjusted quarterly earnings are projected to surge 13.5% to reach $1.09 per share. Plus, MSFT’s full-year earnings are projected to expand by over 14%—with its fiscal 2020 EPS figure projected to jump 11.4% above our fiscal 2019 estimate. 

 

Bottom Line

Investors should be pleased with Microsoft’s relatively consistent top and bottom-line growth estimates, especially after fellow giant Apple slashed its Q4 guidance. MSFT is also a dividend payer that has consistently raised its quarterly payout every year.

Microsoft is also trading at 21.9X forward 12-month Zacks Consensus EPS estimates at the moment, which marks a discount compared to its industry’s 28.2X average. Plus, MSFT has traded as high as 27X over the last year, with a one-year median of 24.7X. This means Microsoft’s valuation picture isn’t stretched at the moment.

With all that said, now might not be a bad time to think about buying this stable and growing tech powerhouse’s stock amid increased uncertainty from the likes of Apple, Netflix, Facebook (FB - Free Report) , and others.

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