Buy Microsoft as MSFT Stock Climbs Near High On Augmented Reality Push? - February 26, 2019

Shares of Microsoft (MSFT Free Report) have climbed over 10% since the start of the year, along with Amazon (AMZN Free Report) , Facebook (FB Free Report) , and much of the rest of the market. But is now the time for investors to buy Microsoft as MSFT stock races back toward its 52-week and all-time high?

Recent News

Microsoft unveiled last weekend its next generation augmented-reality headsets at the Mobile World Congress in Barcelona. The firm’s HoloLens 2 technology combines artificial intelligence and mixed reality and has been pitched as a way to bring companies into the future. Unlike some of its peers, Microsoft and CEO Satya Nadella showcased MSFT’s HoloLens 2 as a cutting-edge tech for the corporate world, instead of entertainment.

Microsoft has tried to position itself as a leader in an industry that some analysts expect to explode over the next 10 years. Fellow tech giants, including Apple (AAPL Free Report) , Google (GOOGL Free Report) , Facebook, and many others are all racing to roll out augmented reality technology—which allows users to see images and holographic elements intertwined with the real world.

MSFT has, however, seemed to stand out by pushing out a more practical offering, with an enterprise focus. In fact, Microsoft won a $480 million U.S. military contract to supply augmented reality systems to the Army. The news broke back in November, but some Microsoft employees recently protested the partnership.


No matter what happens with the protests or the current generation of its HoloLens tech, it seems that augmented-reality will play a somewhat significant role in Microsoft’s future. On top of that, the company’s cloud computing unit boasts the second-largest market share in the industry, behind only Amazon. Plus, the company’s Xbox-driven gaming unit has grown and its Netflix (NFLX Free Report) -style Game Pass looks poised for larger adoption.

Looking ahead, Microsoft’s third-quarter fiscal 2019 revenues are projected to jump 11.24% to reach $29.83 billion, based on our current Zacks Consensus Estimate. This would practically match Q2’s 12% top-line expansion.

Meanwhile, MSFT’s current full-year revenues are projected to surge over 12.2% to reach roughly $124 billion. Plus, the firm’s fiscal 2020’s revenues are expected to climb nearly 10% above our current year estimate to hit $136.03 billion.

Microsoft’s double-digit revenue projections are impressive for a company of its size and age and look strong compared to Apple’s expected downturn. On the bottom end of the income statement, MSFT’s current full-year earnings are projected to jump 13.7%. Furthermore, the company’s 2020’s EPS figure is expected to climb 11.8% above our 2019 estimate.

Investors will see that the company’s earnings estimate revision picture has trended more heavily in the wrong direction recently. This helps Microsoft earn a Zacks Ranks #3 (Hold), but this could change as we move deeper into the current period.


Bottom Line

Microsoft clearly sports some impressive top and bottom-line growth estimates and is ready to expand into even more new growth areas, just as it did with cloud and IoT. The company is also a dividend payer that has seen its stock price climb to start that year. All of this helps make MSFT stock one worth considering at the moment, especially as some of the larger tech players, like Apple, face tougher times ahead.

Microsoft stock closed regular trading Tuesday up 0.69% to $112.36 a share, which marked only a slight downturn from its 52-week and all-time high of $116.18 per share.

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