Bulls vs Bears: Should I Buy Microsoft?

Microsoft is flexing its cloud capabilities, but does that impressive growth make it a buy?

Ollie Smith 18 November, 2021 | 1:09PM
Facebook Twitter LinkedIn

Microsoft HQ

Bulls Say:

  • Public cloud is widely considered to be the future of enterprise computing. Microsoft’s Azure is a leading service that benefits from the evolution to hybrid environments and then ultimately to public cloud environments.
  • A shift to subscriptions accelerates growth after the initial growth pressure. Microsoft has passed the margin inflection point now, and margins are increasing again, returning to pre-Nokia and pre-cloud levels.
  • Microsoft has monopolylike positions in various areas like operating systems and Office that serve as cash cows to help drive Azure growth.

Bears Say:

  • Momentum is slowing in the shift to subscriptions, particularly in Office, which is generally considered a mature product.
  • Microsoft lacks a meaningful mobile presence.
  • Microsoft is not the top player in its key sources of growth, notably Azure and Dynamics.

Morningstar Analyst Dan Romanoff Says:

Since taking over as CEO in 2014, Satya Nadella has reinvented Microsoft (MSFT) as a cloud leader. In our view, this company is one of two public cloud providers that can deliver a wide variety of platform-as-a-service and infrastructure-as-a-service solutions at scale.

Additionally, Microsoft embraced the open-source movement and has largely transitioned from a traditional perpetual license model to a subscription model. Finally, Microsoft exited the low-growth, low-margin mobile handset business and is driving its gaming business to be more cloud-based. These factors have combined to drive a more focused company that offers Microsoft impressive revenue growth with high and expanding margins.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Microsoft Corp329.49 USD0.00Rating

About Author

Ollie Smith  is editor of Morningstar UK