Is Microsoft a Great Long-Term Investment?

OVERVIEW

Microsoft Corporation is a company based in the United States. The company is one of the largest technology companies in the world, manufacturing and designing both the hardware and software for its products. The company operates Windows, and business and productivity tools like Skype, Outlook, Excel, etc. The company also manufactures hardware like Surface devices, Xbox, and many others. Last but not least, the company operates the Microsoft Azure cloud.

Why You Should?

  1. The COVID-19 pandemic has boosted the demand for most of the products and services that Microsoft offers. As people started to work and learn from home, Microsoft saw a rise in demand for their Surface devices, productivity tools like Microsoft Teams, and entertainment devices and services like its Xbox product line. Other aspects of the business such as Microsoft Azure have also risen in demand.
  2. Microsoft has an extremely solid brand recognition around the world. This will help its future growth in the technology industry. For example, Microsoft is well known for its popular operating system, Windows, its popular gaming products, Xbox, and its productivity tools, Word, Excel, Teams, and many others. This strong brand recognition will benefit the company’s future growth as there will be customers who want to further enter the Microsoft ecosystem.
  3. Microsoft will benefit from changing consumer trends around the world. As the adoption of technology to do tasks will benefit the company’s sales. For example, there are more companies who are turning to cloud solutions offered by companies like Microsoft. There are also others who are integrating their workflows through Microsoft tools. This will benefit the company in the future and will also benefit investors in the company.
  4. Microsoft is in most of the growing technology industries around the world. For example, the cloud and gaming businesses are poised for strong growth in the future. Other productivity hardware tools are also growing in popularity in the future due to the change in consumer trends mentioned above. This will benefit the company in the future and will also benefit investors in the future.
  5. The future of the company rests on the cloud business, Azure. The company has been executing well in this space in the past and looks for strong, double-digit, percentage growth in the future. In its most recent quarter, Microsoft reported cloud revenue of 15 billion. This is a growing industry that will offer Microsoft with a steady revenue and profit streams. This has benefited the company in the past and will continue to benefit the company in the future.
  6. The company has reported rising revenues and profits over the past couple of financial years due to the reasons mentioned above. This has helped the company grow its businesses and has also benefited investors in the company. This growth will continue to occur over the future which can be seen in the company’s strong outlook. In the financial year of 2020, the company reported revenues of around 143.01 billion and profits of around 44.28 billion. Both of these metrics are higher than what the company reported in the financial year of 2019 when they had revenues of around 125.84 billion and profits of around 39.24 billion.

Why You Should Not?

  1. The only negative about investing in Microsoft is the tough competition that it faces across all of its business sectors. Companies like Amazon, Google, Apple, and Sony compete with Microsoft in the cloud, gaming, and consumer electronics business. This might hurt the company in the future and might also hurt investors in the company.

MY OPINION

I think that Microsoft is a great long-term investment due to the impacts from the COVID-19 pandemic, a strong brand recognition, changing consumer trends, its position in several growing industries, a strong cloud business, and rising revenues and profits. However, tough competition might hurt the company in the future.

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Aaditya Patel

Aaditya Patel

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Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.