The shares of global technology giant Microsoft Corporation (NASDAQ 🙂 have had a tremendous run so far in 2020. Investors have seen a massive rise in the stock after seeing the first quarter. This created strong expectations for additional profit this year.
Currently the world's most valued company, with a market capitalization of $ 1.4 trillion, Microsoft stock has already risen by around 19% this year, after shares had a return of around 60% earlier in 2019 for shareholders. MSFT closed at $ 188.94 yesterday, slightly below its all-time high of $ 198.52 reached on June 10.
After this powerful advance, the big question for investors is whether this great stock is still worth buying, especially when the post-pandemic rally could falter and many top fund managers question the likelihood of a rapid economic upswing while the virus continues to rage.
It is likely that Microsoft could go down 10-15% if there is a market correction when investors decide to take some risk off the table and revisit the pandemic. That said, the Redmond, Washington-based software behemoth is one of the safest long-term bets in the tech space. That makes the shares worth buying if they get cheaper.
All The Right Moves
The reason for this optimism is simple: Microsoft has over the past decade. It is now in the satisfactory position that he can receive the rewards of his previous investments.
After a massive transformation led by CEO Satya Nadella, which started more than five years ago, the company has grown into one of the most powerful players in the fast-growing cloud computing market and has the second largest market share of the segment, with only Amazon (NASDAQ 🙂 ahead.
When he took up the position of CEO in early 2014, Nadella began to diversify Microsoft's revenues from his traditional growth engines – Windows and Office software. The company has invested heavily in data centers and other infrastructure to help enterprise customers run applications and store information. Growth in this segment continues unabated. Microsoft's earnings more than doubled in the four quarters through December 31.
The coronavirus pandemic in 2020 was a tremendous shock to the global economy, raising concerns that companies worldwide would cut IT spending as a result of one of the worst recessions of this century. But given the Q1 and latest trends figures, it seems that Microsoft's business environment has only become more productive.
In Q1 2020, the company's cloud operations grew stronger as COVID-19 lockdowns accelerated the pivot from on-premise to cloud-hosted workflows. Demand for Microsoft's cloud infrastructure, communications, CRM, and productivity tools has skyrocketed. Still, despite a strong bullish trend supported by robust fundamentals. went. This may be of particular concern as evidence of a second wave of viruses in the United States is mounting
Nevertheless, apart from these short-term risks, executives at Microsoft remain resolutely positive about future earnings growth. As Nadell told investors in April after the recent earnings release:
"We've seen two years of digital transformation within two months. From teamwork and distance learning, to sales and customer service, to critical cloud infrastructure and security."
“We work with clients every day to help them adapt and stay open for business in a world of remote everything. Our sustainable business model, our diversified portfolio and our differentiated technology stack position us well for what lies ahead. "
Add Microsoft & # 39; s cast-iron dividend and excellent payout track record to the appeal of the stock and it looks like an even more attractive investment – especially in an uncertain economy. Since 2004, when the tech giant first paid a dividend, the payout has more than quadrupled. Currently, the annual return is 1.09% with a quarterly distribution of $ 0.51 per share.
Of course, companies that pay out reliable dividends are much more able to withstand sales pressure than companies that don't, making them less volatile in a bear market because they offer guaranteed, steady income to shareholders.
Bottom Line
As investors remain nervous about the global economic outlook amid fears of the second wave, any weakness in Microsoft stock should be viewed as a buying opportunity. The company is a mainstay of the global economy.
It develops and supplies 75% of the operating systems used by computers and servers worldwide. Microsoft's strong foundations make it a safe, long-term bet in the tech room.
