Should you Invest in Microsoft?

OVERVIEW

The Microsoft Corporation develops and sells software and hardware products around the world. Some of its software products include Office, Microsoft Teams, and Skype. Its hardware products include Microsoft Surface, PC’s, and Xbox products. It integrates its Microsoft Azure cloud with these products to further streamline the consumer experience.

Why You Should?

  1. Microsoft has great leadership. Satya Nadella is the CEO of the company and under him, the company has seen a spike in both revenue and profits and have further diversified their business into the cloud space. This will benefit the company in the long term.
  2. Microsoft is talking with the parent company of TikTok to acquire it. This will benefit the company in the long term.
  3. The Windows OS is a very popular operating system. Through this system, Microsoft makes money both through its popular hardware products and its software ones as well. Because it is beautifully integrated to the OS, people will spend extra for Microsoft Office and other products instead of any other competitors.
  4. The COVID-19 Pandemic has benefited the growth of Microsoft. Because people are now working from home, Microsoft has seen a rise in both hardware and software sales as people need to prepare for more online work. This growth and acquisition of new customers will benefit the company in the future.
  5. The company has had its Azure Cloud business see a spike in demand. The Microsoft Cloud is well integrated into its other products so companies will rather use Azure than other competing clouds like AWS. This growth will benefit the company’s long term goals.
  6. The company has had solid financial records ever since the onboarding of Satya Nadella as their CEO. This growing balance sheet will benefit the company’s future growth. In the financial year of 2020, the company reported revenues of around 144.3 billion and profits of around 44.3 billion. Both of these metrics were better than what the company had reported in the financial year of 2019 when the company reported revenues of around 125.8 billion and profits of 39.2 billion.

Why You Should Not?

  1. Microsoft stock is trading near its all-time highs. The stock is also trading at 36 times earnings which means that it is a more volatile investment. I would wait for the stock to fall a bit before buying into it.
  2. Microsoft still faces competition from several large players. Its hardware and software business has direct competition from Apple and Google. Its cloud business has direct competition from AWS and the Google Cloud. This might hurt the company’s future growth.

MY OPINION

In my opinion, I think that Microsoft is a good long term investment with strength in the hardware, software, as well as cloud business. However, an expensive stock and high levels of competition might steer investors away from this stock.

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