Microsoft Valuation!

Dear Reader,


Here I am going to attempt to value Microsoft Corporation, the world leader in the personal computer operating systems with MS Windows and world leader in enterprise software with the MS Office suite.

Currently the market values Microsoft at 659.67 billion USD with a price of 85.51 USD which is a truly staggering sum. Is the company worth the money? In my opinion, in the current economic climate the answer is yes. Actually, I think Microsoft is worth 20% more or circa 783 billion USD at a price of 106 USD.

Why? Simply put Microsoft corporation is at the forefront of the cloud computing revolution with its Office 365 enterprise suite and Azure cloud computing platform. MS Windows and MS Office are the biggest revenue generators for Microsoft. And the companies are switching more and more to the Office 365 subscription model. Azure is the second most popular cloud computing platform after Amazon Web Services. In addition, Microsoft is earning a lot with the Xbox console. The company entered the hardware business with its Surface Tablet and Surface Book laptops.

What are the risks for my forecast that the real(intrinsic) value of Microsoft is 783 billion USD, price of 106 USD or 20% above its current market price of 85.51? Basically, the global economy could go into a recession or negative GDP growth for two or more quarters. Usually, the information technology stocks are geared(leveraged) to the economic cycle and their prices should fall by a higher percentage than the main indices like S&P 500 or Dow Jones Industrial Average. Usually the Nasdaq composite falls by more. Companies will still continue to buy MS Windows and MS Office, but they are likely to cut costs and maybe buy fewer Microsoft licenses.

In short, if the global economy enters a recession I expect Microsoft's value to fall by more than 30%.

At the moment though, I stick to my forecast that the intrinsic price of Microsoft's stock is circa 106 USD or 20% above the current price of 85.51 USD.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed in the blogpost and posts on social networks(Twitter, LinkedIn etc.) are the author's and they in no way express the opinion or official position of the company where I am working currently!

Conflicts of interest: I may possess some of the securities,currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!


Kind regards,
Petar Posledovich