To The Moon

$Microsoft(MSFT)$

Microsoft (MSFT) is one of the world’s largest diversified technology companies, offering a wide variety of products and services from enterprise productivity software, to computing devices, to cloud-based services.

The company operates in three main segments: 1) Productivity and Business Processes, which mainly consists of Office productivity software, LinkedIn, and Dynamics ERP and CRM software; 2) Intelligent Cloud, which consists of Azure cloud services and server products; and 3) More Personal Computing, which includes Windows, Devices (Surface and PC accessories), Video Gaming/Xbox, and Search Advertising/Bing.

Among the MAMAA (Meta, Apple, Microsoft, Amazon, and Alphabet) Tech Superstocks, I believe MSFT is the most resilient and should be able to weather this market downcycle with many sustainable advantages and economic moat.

Firstly, it is extremely unlikely that clients will cut IT spend on MSFT’s products, particularly in times of reduced budgets. Microsoft’s long track record and breadth of product offering make them a strong competitor for a broader range of enterprise software. Its universal brand recognitions have established deep relationships with enterprise clients, which positions Microsoft as a “low risk” vendor regardless of economic conditions.

MSFT also have strong positioning in fast-growing, innovation heavy markets including public cloud, gaming, and digital advertising. Microsoft’s significant investments in scaling its cloud platform, Azure, have driven strong returns, becoming the #2 player in a sizable and fast-growing market. Microsoft's history with enterprise IT purchasers (and ease of integration with its workplace products) has helped the company come to the forefront of the on-prem to cloud shift. Microsoft’s investments in cloud technology, aside Azure, are also powering notable advances across its product portfolio, in areas as diverse as CRM/ERP offerings, security, gaming, and advertising. Microsoft is able to invest at a scale that most other competitors in these markets cannot match.

MSFT’s broad product array allows it to compete in several addressable markets ranging from hundreds of billions to trillions of dollars of annual spend, with exposure to some of the fastest-growing elements within IT software. In addition, the company competes in the ~$190B global gaming market, and the ~$520B digital advertising market across a variety of channels (Bing in Search, LinkedIn in Social, and its new ambitions in CTV with the Netflix deal). In all, the market backdrop is one of secular tailwinds where MSFT can use its scale to compete.

MSFT will most likely continue to grow its EPS at double digit percentage through 2024. The current valuation of 24x PE multiple is far below the 3-year historical average PE ratio of >30x.

@TigerStars@Daily_Discussion