Microsoft Stock Forecast: Take Your Profits On Microsoft ASAP

motek 1The Microsoft Stock Forecast article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.

Summary:

  • The artificial intelligence algorithms of Seeking Alpha and I Know First give Microsoft’s stock a Neutral outlook.
  • You can hold on to your MSFT or be proactive and take your profits now. MSFT’s YTD gain is already +30.14%.
  • Growing government crackdown in China will inspire Alibaba Cloud and Tencent Cloud to expand their international markets. They can steal customers from Azure.
  • There’s a rising global crisis over the Delta variant of the COVID-19 virus. People are again suffering under new lockdown rules.
  • Microsoft is relatively overvalued against its faster-growing peers.

I reiterate my July 6, 2020 cash in your profits advice for Microsoft (MSFT). This cloud computing company’s stock has peaked. There is no compelling near-term event (or new product) that could boost MSFT beyond $300. Seeking Alpha’s Quant AI grading system only gave a Neutral outlook for Microsoft. It is also worrisome that Seeking Alpha’s AI algorithm gives Microsoft a Value Factor grade of D-, and a Growth grade of D. Let us not be greedy, cash-out that +30.14% YTD gain of MSFT ASAP (as soon as possible). Use the net profit to buy other stocks or a new car. 

(Source: Seeking Alpha)

The euphoria that came after Microsoft’s estimates-beating FQ42021 is not going to last long. Sell at a fat profit now and just wait again for the stock market to bring down MSFT’s price. Highly-vaccinated America’s surging Delta variant-fueled COVID-19 cases are worrisome. There’s an emerging Delta variant COVID-19 global crisis. Even our backward province is under lockdown again because of new variants of COVID-19. This is just bad for the global economy.

A mutating COVID-19 virus is detrimental even to a $2.18 trillion company like Microsoft. Alert Level 4 lockdown means no traveling between towns/cities, 8 pm to 6 am curfews, and strict stay-at-home edicts. This means a lower income potential for employed and self-employed people. Lower income means lower chances to renew our Microsoft 365 or Office 365 subscriptions. Lockdown means there’s less money for us to spend on Xbox games.

Microsoft Stock Forecast: Microsoft’s Stock Is Pricey

Take your profits on Microsoft now because its stock is relatively overpriced when compared against its cloud computing peers. The general investing public will eventually realize that MSFT’s TTM P/E valuation of 36.32 is unfair when compared to the 29.45 of Google (GOOGL) and 26.45 of Alibaba (BABA). Microsoft’s TTM Price/Sales ratio of 13 is also expensive compared to Google’s 8.31, Alibaba’s 4.46, and Tencent’s (TCEHY) 7.13.  

(Source: Seeking Alpha Premium)

The current relative overvaluation of MSFT will eventually get corrected. Investors are not dumb. They will eventually understand the peers growth comparison chart below. The reason why Seeking Alpha’s Quant AI gave MSFT a low D- Growth Grade is because its 5-year revenue CAGR is only 13.02%. Microsoft’s forward revenue growth rate is 14.68%. These growth numbers are low compared to the growth performance stats of Google, Alibaba, and Tencent.

(Source: Seeking Alpha Premium)

The obvious risk now is that institutional investors, hedge fund managers, and deep stack market gamblers will soon decide that MSFT is not really a top growth stock in the league of Google or Alibaba.

Microsoft Azure Has Incoming Headwinds

Microsoft Azure has obvious headwinds incoming. Aside from the recent cancellation of the $10 billion JEDI contract, Azure is not only going to get more headaches from Amazon (AMZN) Web Services. Cisco (CSCO) is luring companies back to the safer haven of private cloud computing. Cisco will not only supply the network routers and switches. Cisco will also offer extensive Azure-like cloud computing services under the more secure Private Cloud settings. Private Cloud infrastructure spending last year was 21.5 billion, less than half of Public Cloud infrastructure spending of $52.4 billion. However, security/privacy concerns will ultimately compel more government agencies, corporations, and colleges to choose Private Cloud.

Hackers are having a good time attacking Microsoft Azure. Microsoft Azure is Public Cloud-centric. Yes, Azure Stack is Microsoft’s Private Cloud offering since 2017 but it never gained any traction against IBM (IBM) Cloud – the undisputed leader in Private Cloud infrastructure services. Cisco Cloud might just help IBM Cloud disrupt the Public Cloud leader of Microsoft Azure and Amazon Web Services.

The increasing Chinese government crackdown versus Tencent and Alibaba will force those behemoth companies to expand their international cloud computing services. Going forward, Alibaba Cloud might eventually become the no. 3 global player in cloud computing. Going forward, increased competition from Alibaba and Tencent means a smaller share for Microsoft Azure. The global cloud computing infrastructure industry was worth $39 billion in Q1 2021.

(Source: Statista)

The reason why Alibaba is now the no. 4 cloud infrastructure service provider is because of its cheaper-than-Azure pricing tactic. Alibaba Cloud and Tencent Cloud are brave enough to sell cloud computing instances for less than $5/month. I don’t think Satya Nadella will stoop down to this pricing level. Nadella would rather lose market share than see a drop in Microsoft’s high profitability margins. The high profitability of Microsoft is why it is overvalued right now. However, the emergence of more affordable office software suites like WPS Office and Polaris Office will eventually chip away at Office 365’s dominant 47.5% market share.

Conclusion

Yes, you can hold on to your shares. On the other hand, Microsoft’s stock is relatively overvalued when compared to its cloud computing rivals. This is a dangerous sign because MSFT’s growth performance stats are not that impressive. There’s also incompetence on the part of Microsoft’s best highly-paid programmers. They allowed me to defeat their very strict TPM 2.0 hardware requirement for Windows 11. My creativity means tens (or hundreds) of millions of people are not going to pay $20 or $30 per month for the cheapest Windows 11 version of Windows 365. The upcoming Windows 11/Windows 365 tailwinds are unlikely to become substantial. Only PC vendors and processor makers like Intel (INTC) are going to get a boost from Windows 11.

The screenshot below is prima facie evidence I can install Windows 11 on a 9 year-old laptop (Acer V3-471G) that has no UEFI, Secure Boot, and TPM 2.0 chip. The Intel Core i5-321M processor is not included on Microsoft’s list of Windows 11 supported processors.

(Source: Motek Moyen)

My take-your-profits-now recommendation for MSFT is fortified by its low 1-year trend score from I Know First. MSFT’s 1-year score is only 28.62. It is clear that the AI algorithm of I Know First is not confident that Microsoft’s stock is NOT gonna rise notably for the next 12 months. Uncertainty is the no. 1 enemy of investing. Better act now and rake in your profits on MSFT.

Past Success With Microsoft Stock Forecast

I Know First has been bullish on Microsoft’s shares in past forecasts. On our July 6, 2020 premium article, the I Know First algorithm issued a bullish Microsoft stock forecast. The algorithm successfully forecasted the movement of Microsoft’s shares on the 1 year time horizons. MSFT’s shares rose by 35.64% in line with the I Know First algorithm’s forecast.

Microsoft Stock Forecast

Here at I Know First, our AI-based stock forecast algorithm has modeled and predicted assets price movement worldwide for short-term and long-term time horizons, ranging from 3 days to a year. The database used is 100% historical data free from human-derived assumptions and is constantly evolving with newly added data and adapting to changing market situations. Today, we are producing daily forecasts for over 10,500 assets such as forex forecast, as well as gold predictions, while also providing the latest Apple stock news. These forecasts generated by our quant trading tool are used by institutional clients, as well as private investors and traders to identify the best investment opportunities in the market.

premium badge

To subscribe today click here.

To learn more about I Know First and the solutions we offer, visit our website in the links below:

Please note-for trading decisions use the most recent forecast.