The past few weeks have been exciting for Microsoft (NASDAQ 🙂 investors. The global technology giant has been busy using its massive pile of money to position itself for future growth, at a time when the pandemic rally in technology stocks are showing signs of spike.
The Redmond, Washington-based the latest movements of software behemoth prove the company is an ideal choice for long-term investors looking for both capital appreciation and an increasing income stream from the company's dividend, which is currently 0, 95% yield.
After buying the owner of popular video game publisher Bethesda Softworks earlier this year, Microsoft is reportedly in exclusive talks to get the messaging platform Discord Inc. to be acquired for $ 10 billion or more.
The purchase of the six-year-old startup will help Microsoft boost its video game company that encompasses the successful Xbox platform and social networking footprint. If successfully closed, the Discord deal would be Microsoft's largest acquisition since LinkedIn's purchase of $ 26.6 billion in 2016.
With this acquisition activity, the company also expands its role as a major government supplier. The company told investors in a blog post on Wednesday that it will build custom augmented reality headsets for the US military in a deal that could be worth up to $ 22 billion.
The devices will be based on Microsoft's HoloLens headset that debuted in 2016. More than 120,000 units of the custom gear will be shipped over 10 years, supported by Microsoft's Azure cloud computing service.
The "Netflix of Gaming"
As a result of Microsoft's growth-oriented moves, analysts predict additional gains for the stock price after an increase of more than 35% in 2020.
According to Tipranks, all 23 Microsoft analysts have a buy rating on the stock. Their consensus one-year price target is $ 279, up 15% from Thursday's close of $ 242.35.
In a note to investors last week, Morgan Stanley acknowledged an & # 39; overweight & # 39; rating to MSFT with a target price of $ 290 per share.
According to the note, Microsoft's recent effort to strengthen its community and content portfolios is positioning the company to enable it to conquer much of the gaming market. With approximately 18 million monthly subscribers to the Game Pass service, Microsoft is on track to become the “Netflix of gaming”.
Microsoft's gaming expansion comes after a strong year that delivered tremendous growth for its Azure Internet-based cloud computing services. in that division jumped 50% in the most recent quarter as enterprise customers accelerated a shift to the cloud during the pandemic, where they can store data and run applications over the Internet. For more than three consecutive years, Azure revenues have nearly doubled each quarter.
Bottom Line
MSFT continues to expand its market share and move deeper into the cloud. and gaming. At the same time, it maintains its leading position with legacy software products such as Windows and Office.
This sustainable advantage will help the company achieve sustained, double-digit growth in sales, earnings per share and free cash flow. making it a reliable tech stock to own now and in the longer term.
