Microsoft Stock Analysis (MSFT)- A Buy at ALL TIME Highs (2020)?

0:00 Microsoft's stock analysis Microsoft stock is nearing all-time highs and is forming a technical buy pattern if you have been watching the stock like I have it is not hard to see that Microsoft stock has been on an absolute tear since about January of 2019 but the more complicated and relevant question that I would like to answer is is Microsoft stock worth buying at almost all-time highs and my answer to this question is yes their cloud business is absolutely

0:38 Exploding at a compound annual growth rate of about 40 percent over the last five years not only that but Microsoft has enough cash to the tune of about one hundred and thirty three billion dollars if we do end up going into a recession or even a depression in 2020 then I'm gonna provide you with Ahmed's value as I've spent many hours researching this dividend growth stock for all the foolish and the bearish fundamental and technical aspects so that you can make

1:10 Your own decision about whether Microsoft fits into your balanced portfolio if you are new here I encourage you to hit that little red subscribe button as I come out with new videos every week analyzing today's hot stocks from a fundamental and technical analysis perspective also I want to appreciate everyone who has subscribed as would just hit 100 subscribers if you're considering Microsoft as an investment you need to understand what they do to bring their shareholders

1:44 Value according to their most recently filed ten key which covers the period of q1 to 2020 Microsoft has three main business segments the first segment is productivity and business processes this is basically just productivity and enterprise software including Microsoft Office then and Skype for business the second segment is the intelligent cloud as I've been doing research for these videos including the one I published last week Alibaba I have noticed that cloud

2:17 Computing over the last decade has been a very relevant and growing trend and I believe it'll continue to be relevant and continue to grow for about the next decade or so Microsoft's intelligent cloud business includes server products and cloud services including Microsoft Azure Microsoft Azure is basically a public cloud computing platform that can provide services such as storage networking analytics and more Microsoft has scored countless fortune 500

2:46 Companies as customers for this platform including logs reins BMW and Adobe Microsoft's third and final business segment is called more personal computing or as I like to call it etc so in this excetera type of category we have multiple streams of revenue including that from licensing Windows software selling hardware such as the Microsoft Surface and other PC accessories and the revenue that comes from selling actually Xboxes and the content and the services that come from

3:21 That do I think Microsoft is extremely dependent on technology absolutely but I think that the good thing is they are extremely diversified with multiple different types of revenue coming from multiple different types of technology services and hardware and on top of that they sell a lot of different technology that people need to do their jobs so I think that that makes them somewhat recession-proof in those area my nine-to-five job is an auditor with

3:45 Earnest and young and we use Microsoft Word Microsoft Excel and Microsoft teams to complete audit tasks and communicate with each other each and every day so the point that I'm trying to make here is that Microsoft investors do not need to be worried about the business being too focused on one segment or one product in the past this has been a criticism of Apple because Apple used to be so dependent on their iPhone sales only whenever I'm analyzing investments

4:14 I relied much more on fun analysis metrics than technical analysis metrics as I believe fundamental analysis metrics are much more concrete and reliable ever there is one technical analysis pattern that is particularly relevant to Microsoft stock in May of 2020 if you have never heard of support or resistance there are basically levels that are popular to sell a certain stock at investors or more commonly traders use them as areas to buy stocks at for

4:42 Lower risk or sell stocks at for a profit in about November of 2019 Microsoft broke through resistance levels at the 142 to 143 level and skyrocketed by way to 190 dollars a share part of this momentum came from no previous buyers existing at the 144 to 190 dollar area because nobody had ever bought at this 144 to 190 dollar level before there were fewer sellers because nobody had ever bought the stock at a higher price and then been down on their

5:17 Investment and was just simply waiting to sell so they can be February / March 2020 came around and causing Microsoft shares to trace all the way back down to the 130 / 131 support level and now we are back in the hundred and eighty s with a slight retracement this is setting up to be a textbook up and handle technical patch the point of going for that long-winded explanation is to emphasize that if Microsoft breaks 190 and hits fresh all-time highs then

5:49 There will be no resistance there and there also be no previous buyers trying to sell to break-even Microsoft has a price to earnings ratio of thirty point seven five as of May 8 2020 a politico softs biggest competitor and they currently have a price to earnings ratio of about 24 so when comparing to Apple Microsoft stock is actually relatively expensive this is likely due to the rapid growth of their cloud business as I had mentioned earlier in this vid

6:21 It has a compound annual growth rate over the last five years of about forty percent which is absolutely ridiculous considering the scale they're running this business at a high price to earnings ratio is not necessarily a bad thing you have in an investment as long as the growth is impressive enough to justify the high multiple to consider growth as part of that ratio we can turn to the price to earn so growth ratio or more commonly referred to as the PEG

6:49 Ratio the PEG ratio is actually very similar to the price earnings ratio we take that price to earnings ratio and we divide it by growth so that way we consider growth when we're valuing an investment Microsoft actually has a current price to earnings to growth PEG ratio of two point five one so even with the growth considered it still got a pretty rich valuation on this channel on nine to five investing we keep it real so I like to talk about the upsides and

7:20 Downsides to each investment that I'm analyzing and to me this is the one big downside I seen a Microsoft stock I think at the current prices of a hundred and eighty dollars to one hundred and ninety dollars a share the valuation is just looking a little lofty regardless I think that if you're holding for the long term you're going to do well because the fundamentals are impressive in just about every other way now that I'm nice and hydrated I want to

7:56 Talk about some of those impressive fundamentals of Microsoft has Microsoft has impressive revenue growth with a net profit margin of about 33% if you look at this chart that I made you can see that Microsoft has a compound annual growth rate of about 6.1 percent over the last five years which is certainly a robust for a company the size of Microsoft the revenue growth is great and all but I think what has really move the stock to new fresh all-time highs in

8:26 The recent past is its net income growth Microsoft had net income of about 39 billion dollars in fiscal year 2019 Microsoft had a compound annual growth rate in net income over the last five years of about 26 percent this revenue growth is extraordinary given the size and maturity of Microsoft's business I have already said it twice in this video but I'm actually gonna say it again because it is just that significant Microsoft's cloud computing business has

8:58 A 40 percent five-year compound annual growth rate and perhaps even more importantly and this is why it is a major engine for net income growth as a 67 percent gross margin as Microsoft continues to invest billions of dollars into building these competitive modes such as software applications on the cloud cloud security and enhancing these applications with artificial intelligence and machine learning they should only see this cloud business continue to grow another critically

9:29 Important part of analyzing a business is figuring out whether they can generate cash flow especially as we potentially head into a recession or a depression I mean a company can sell their products or services to a customer but does it even really matter if they can never collect on that cash fortunately this does not seem to be a problem for Microsoft as they generated 38 billion dollars of free cash flow in fiscal year 2019 even while paying a

10:00 Dividend of about 2% based on current market prices Microsoft has been able to keep their cash at about a hundred and thirty three billion dollars all the way going back to 2017 and now it seems like this would be more than enough cash to keep Microsoft afloat through any recession or depression that we could potentially go through so I don't think bankruptcy or one of those pesky secondary offerings is even a remote possibility for a company like Microsoft

10:31 If you are enjoying this video so far please smash that like button like I smash this broken TV that I bought for $10 off of Craigslist and a potentially unconvincing attempt to convince you to smash alike budget doing the small actions really helped me grow my channel and reach more people and pursue my passion so it means a lot to me thank you one last fundamental aspect that I would like to briefly discuss is one of the members of management the CEO Satya

11:01 Nadella who is originally actually from Hyderabad India is actually largely credited with Microsoft's tremendous success in the cloud space as he is the executive vice president of the cloud and enterprise solutions group at Microsoft this group actually is responsible for building and running the company's cloud platforms Satya Nadella has actually been with Microsoft since before I was even born he's been with Microsoft since 1992 and he actually

11:31 Became the CEO in February of 2014 under Satya Nadella is leadership Microsoft stock has actually more than quadrupled although the last six years have been historically bullish for the stock market Microsoft share price performance has been off the frickin charts something that might really surprised you is that when Satya Nadella took over his post as CEO in February 2014 Microsoft was trading for just $38 a share now it's trading in 180 190 dollar ring

12:05 Now the point that I'm trying to make by talking about Microsoft CE o is I think that they're an outstanding hands and Satya Nadella really has the right mindset around growing the company as much as possible to finish out the video today I want to inspire you to never settle for normal this is a picture of Bill Gates in his 20 probably not long after he dropped out of Harvard to start Microsoft and change the world and technology as people knew it in 1975

12:36 Forever since young Bill Gates had a dream and he believed that he didn't drop out of Harvard when he did the trend towards widespread computers would leave his entrepreneurial aspirations in the dust so instead of dedicating his time to obtaining that wonderful Harvard education Gates coated software for the world's first personal computer and started his company Microsoft fast forward to 40 years later and Microsoft is an absolute powerhouse of a company

13:05 Worth 1.3 trillion dollars that develops and licenses software manufacturers and sells consumer electronics and has a booming high margin cloth business Microsoft became what it is today because Bill Gates and Friends sought a game-changing trend and absolutely nailed it I am sure many of the people watching this video right now have their own entrepreneurial aspirations like myself my point in telling you all this is to inspire you to take risks

13:38 What is your microscope now please do not get me wrong I do not think that there's anything wrong with going to college for four to five years getting an education and then working a nine-to-five job like I currently do for 30 or more years however if you have an entrepreneurial idea that you are passionate about it is worth taking the risk please just do it I really want to encourage you to emulate Bill Gates and take that risk if the opportunity

14:09 Presents itself because you just never know so please tell me what do you think of Microsoft as an investment for the next three to five years did I not consider additional significant risks outside of the lofty valuation are there other significant catalysts for net income growth outside of the cloud computing business that I did not consider will you own shares of Microsoft in the future do you already own shares of Microsoft what price did you get on that I really want to hear if

14:40 Anyone got them in the forty there I actually reply to every comment that comes on my channel so please let me know your thoughts let me know your questions let's start a conversation and if you are new here please don't forget to tap that little red subscribe button to join the 9 to 5 investing community I will be putting out more videos weekly about today's hot stocks that are gonna be informative and who knows maybe even mildly entertaining so appreciate you

15:08 Guys watching have a great day and please remember to stay hydrated 9 to 5 investing