“Our investments and business model are fundamentally aligned with our customers’ long-term interests and success. This opportunity and responsibility grounds us in our mission to empower every person in every organization on the planet to achieve more.”

– Satya Nadella, chief executive officer of Microsoft.

(Source: Pixabay)

MSFT Stock Forecast

Microsoft (NASDAQ: MSFT) finished off the 2018 fiscal year on a strong note by all accounts. All of the company’s major business segments grew in revenue YoY. The company’s productivity and business process segment grew 13% to $9.7 billion, personal computing grew 17% to $10.8 billion, and most impressively Microsoft’s intelligent cloud segment grew 23% to $9.6 billion. Additionally, LinkedIn revenue rose 37% and surface revenue rose 25%. Such positive growth has led to a 47% run over the past year resulting in all time highs for MSFT.

Competing In The Computing Cloud Market

Since Satya Nadella became CEO 4 years ago, the company has put an emphasis on growing its computing cloud segment. According to Canalys, the global cloud infrastructures services market was worth over $50 billion in 2017 and is expected to surpass a whopping $150 billion by 2020. Microsoft’s biggest competitor in the space is Amazon Web Service (AWS), however, Microsoft has been increasing its market share- particularly with its Azure hyperscale cloud. Microsoft has been investing heavily into its cloud system and now has global data centers in over 50 regions, more than any of its competitors. This investment is already paying off: Azure revenue grew nearly 89% in another consecutive quarter of large growth. This is the first time Azure revenue has grown by less than 90%, but even so if this still high YoY growth continues, it could become one of the largest sources of revenue for the company.

The cloud-based service has provided multiple revenue streams for Microsoft. The company recently teamed up with Walmart in a five-year deal to price the brick-and-mortar retail giant with access to Microsoft’s cloud based solutions such as Azure and 365. Additionally, Microsoft is one of many tech companies to have entered the oil and gas industry to manage mass amounts of data with its cloud-based services. The company understands many of the concerns of the industry and is proactive in assuaging any doubt about implementing the cloud and gaining more business in this market.

Even More Advancements

Amazon is employing its cloud based services to create a new cloud gaming system dubbed Scarlett Cloud. Unlike a traditional Xbox console where everything is processed locally, in this new development only part of the game will run locally (to counter lagging) and the rest of it will be streamed from the cloud. Microsoft is one of the first companies to attempt this and if successful, the company will be able to capitalize on greater games sales. Additionally, if this new system is successful it will be the first of its kind and change the gaming landscape.

A traditional Xbox (Source: Wikipedia)

Microsoft is also venturing into the healthcare industry like many other tech companies. Despite the fact that the company has been involved in the industry for years with wearables and other forays, Misrosoft officially launched a healthcare unit in June and now employs over 1,000 people in healthcare providing services to over 160,000 customers. Moreover, the company’s NExT healthcare initiative aims to use AI to the industry. Some advancements from NExT include the ability to use cloud computing and AI to identify and diagnose medical conditions.

Additionally, as highlighted in the quote from Satya Nadella at the beginning of this article, Microsoft wants to play a role in its customers’ long-term interests. In this vein, Microsoft’s Airband Initiative will help to extend broadband to over 2 million people in underserved parts of rural America in the next 5 years. Nearly 20 million people in the united states lack access to internet connection which is absurd in the modern world we live in. On July 24, in combination with RTO Wireless, Microsoft announced an agreement to provide broadband access to nearly 300,000 people in Maine and New York.

Technical and Financial Analysis

 Over the past six months, MSFT has consistently been above its 200 day simple moving average (SMA) shown in purple, a bullish indicator for the company. While the stock has occasionally dipped below its 50 day SMA depicted in blue, its strong run as of late has allowed its stock price to rise above the technical indicator, once again showing a positive trend for the future of Microsoft.

(Source: Yahoo Finance)

With a 5 year PEG of 2.00, Microsoft does not appear to be overvalued when accounting for the expected growth of the company and its revenue in the upcoming years. Microsoft expects revenue for the first quarter of the 2019 fiscal year to be between $27.35 billion and $28.05 billion. Additionally, in comparison to many other stocks in the tech sector, a forward P/E of 22.00 seems very reasonable and yet another reason to consider investing in MSFT.

Current I Know First Bullish Forecast for MSFT

The I Know First predictive algorithm currently gives a bullish prediction for Microsoft with the strongest signal being for the 1 year time horizon at 133.89 with an also high predictability indicator of .67.

How to read the I Know First Forecast and Heatmap

Analyst Recommendations

The majority of analysts are in agreement that Microsoft is a buy right now. The majority of analyst price targets are also above MSFT’s current. However, a few think the company is only worth a hold rating.
(Source: Yahoo Finance)

Conclusion

Microsoft is focusing on its future by investing in its cloud computing segment and will continue to chip away at Amazon’s dominant market share. The company is already seeing the results as revenue continues to grow thanks to subsectors like its Azure cloud platform. Microsoft is also applying its cloud expertise to other realms such as healthcare, retail, gaming, oil and gas, and more. These strong results in combination with the bullish technical analysis, positive financials, and positive prediction from the I Know First self-learning algorithm make Microsoft a solid buy.

Past I Know First Forecast Success With MSFT

In this forecast posted on September 24, 2017, the I Know First algorithm gave MSFT a very bullish signal of 48.68 with a predictability indicator of .53 for a one year time period. While the forecast has not come to fruition yet, with a month left in the time horizon, MSFT has already gained 43.75% already in accordance with the prediction.

Current I Know First subscribers received this bullish MSFT  forecast on September 24, 2017.

How to interpret this diagram

Please note-for trading decisions use the most recent forecast. Get today’s forecast and Top stock picks.