Microsoft Corporation seems to be one of the "winners" or at least loosing less from the coronavirus disease COVID-19.
Microsoft's stock is down circa 2% from the beginning of 2020 while the Dow Jones Industrial Average is down approximately 25% year to date.
What is the intrinsic valuation of Microsoft in the current coronavirus environment?
Actually, I am relatively pessimistic about Microsoft and technology companies altogether. Microsoft trades at 157 USD currently at 1.2 trillion USD market capitalization. I estimate Microsoft's intrinsic value to be around 700 billion USD or around 91 USD in the current coronavirus environment?
Why? Because sooner rather than later many Microsoft employees are going to get infected with COVID-19 and Microsoft's business will be severely disrupted. Microsoft is no oasis island.
I forecast this period to be the deepest stock market fall measured by the major US, European and Asian stock market indices since the Great Depression. Major stock market indices could fall between 50% and 70%.
Microsoft and other technology companies will not remain unaffected. They cannot remain unaffected when the overall economy is tanking. Yes, I know digitization and cost cutting will be the big themes for the next decade, but technology companies do seem overvalued now. After all, essential things are food, medicine, electricity and heating and not necessarily Facebook, Snapchat, Twitter and Skype and Teams produced by Microsoft.
One of the reasons for the outperformance of technology stocks year to date is that they are the most popular positions in the portfolios of institutions like pension funds, endowments, foundations and hedge funds. These institutions are desperate not to incur losses and are basically in a state of denial by not selling their technology stocks holdings.
Microsoft's main business of Windows and Microsoft Office, though, is essential to the global economy. Because the personal computer operating system is actually the computer. And our hospitals, military, government and households need computing power to survive. That is why Microsoft will remain a viable business.
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 on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".
Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.
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.)!
Respectfully yours,
Petar Posledovich
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