Microsoft sank 10% despite solid fundamentals. Q2 revenue grew 15% YoY in constant currency, beating expectations, with Azure up 38% and Microsoft 365 Commercial rising 14%, driven by steady subscriber and pricing gains. However, ongoing supply-chain constraints capped upside versus buy-side hopes, reviving concerns over near-term Al monetization and delivery capacity.
Risks to Monitor
Supply Chain Delays: If GPU shortages persist beyond 2024, Azure growth could stall near 30%.
Enterprise Spending Pullback: Fed rate hikes could pressure cloud budgets.
Regulation: FTC scrutiny of OpenAI partnership remains a wildcard.
Valuation: Fair at $400?
Post-Drop Metrics:
P/E: ~32x forward earnings (vs. 5-yr avg: 35x)
FCF Yield: ~2.5% (slightly below historical avg)
Price/Sales: ~11x (elevated but justified by cloud margins)
Compared to Peers:
Microsoft trades at a premium to Google (24x P/E) but below Nvidia (45x). Justified by its diversified cash flows (Windows, Office, Cloud, Gaming).
Strategic Recommendation
For Long-Term Investors:
BUY in tranches at $400 and below.
Why: Microsoft’s cloud dominance, AI leadership, and pricing power make it a core holding. The dip prices in temporary noise, not structural damage.
Price Targets:
Short-term (6mo): $420–440 (mean reversion + AI hype)
Long-term (2025): $500+ (Azure + AI monetization acceleration)
For Traders:
Wait for technical confirmation: Buy if:
Stock holds above $390 (200-day moving average).
RSI exits oversold territory (<30) with volume support.
Hedge: Pair with Nasdaq put options to limit downside.
Bottom Line
Yes, this is an overreaction. Microsoft remains the most resilient mega-cap with unmatched enterprise diversification. The selloff is a gift for long-term holders.
Critical catalyst to watch: Azure’s Q3 growth (reported April 2024). Anything above 35% confirms the AI infrastructure advantage.
"The market is a voting machine short-term, but a weighing machine long-term. Microsoft’s fundamentals haven’t changed—only the narrative has."
Action: Start scaling in now. Save ammo for $380–390 if macro worsens.
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