Microsoft Stock Analysis – is MSFT Stock a Good Buy Today?

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Hi i’m jimmy in this video we’re looking at microsoft stock ticker symbol msft so we’re going to look at the basics of microsoft’s business and then we’re going to run through some developments and ultimately try to come up with the fair value for microsoft stock using discounted free cash flow to see if microsoft is worth buying today now real quick before we jump

Into that i just want to tell you about a website that we’re building we’re actually going to be using the discounted cash flow calculator that we’ve already built to try to value microsoft stock i’ll run through that in a minute but basically we’ve already built the dcf calculator we’re gradually going to add other ways to value stocks and we’re trying to make it

Quick and easy for people to basically punch in a ticker symbol and then the website will kick back what the best valuation methods are to use for that particular company based on the fundamentals of that company for example what you would do for tesla isn’t the same thing you would do for a citigroup or an apple that they all different valuation methods based on

The company’s own financial financial dynamics let’s call it so if you’d like to sign up to get access to that website i will leave a link in the description below the advantage of signing up now before all of this is built is that we are locking in the price of somebody would have signed up today and let’s say you signed up you signed up for an annual membership

Well the price gets locked and it never will never go up on you so again i’ll leave a link in the description below if you’d like to sign up for now let’s jump over to the business segments of microsoft’s business so we could see that microsoft breaks our business into three primary segments their largest segment is their intelligent cloud business this represents

About 38 percent of their total revenue this is as of last year’s revenue under 2022 revenue by the way their fiscal year ends in the middle of each year so they’ve already completed 2022 as of june they’re actually working on their 2023 numbers now but their intelligent cloud business represents the their cloud and server products their biggest competitor just

To explain who they are their biggest competitor is amazon web services aws so this is one of their fastest growing segments we’re going to come back to this one in a minute but this is one of the one of the segments keeping microsoft’s revenue pushing higher year after year their second largest segment is their business processes and productivity business line

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And that represents about 32 percent of total revenue now this is where they book revenue for their office products for their skype onedrive they’re they have they own linkedin revenue from linkedin goes here so it’s uh you know again it’s microsoft’s a fairly immersive company they are in a lot of different segments and this is where they house those segments

There’s small a segment although it still represents about 30 percent of total revenue is their personal computing business so personal computing this accounts for their windows products it accounts for some of their hardware things like uh their laptops xbox uh even their xbox software you can sign up for like xbox live things like that that revenue is accounted

For in this business segment so when we look at their segments we can see that overall there are fairly well diversified company in many different business lines and this is likely to serve them well in the coming future in fact if we were to jump over to some of their numbers and we will look at their revenue well we could see that revenue has ramped up nicely and

Analysts are expecting for that revenue to continue to climb higher even as the economy struggles so the animals analyst estimates are the green bars if you’re curious now this is one of the advantages to a company like microsoft microsoft has a relatively strong moat a relatively strong pricing power so as as the economy has struggled and as inflation has gotten

Higher microsoft’s business yes it’s been hurt but it hasn’t been as hurt as many other business lines thanks to their high profit margins and strong free cash flow in fact if we were to go on to our free cash flow chart we can see that free cash flow is not quite as steady as revenue has been but still it’s quite good now analysts are expecting for free cash flow

To continue to climb higher now we don’t have that in this particular chart we’re going to come back to that when we try to do our discounted cash flow calculation for microsoft stock but for now let’s jump over and look at a little bit of news some interesting news that has driven microsoft stock recently so one thing that came out of the recent earnings report

Was that they increased their annual dividend to 272 per share on an annual basis so they pay out quarterly dividends but this is right in line with microsoft consistently returning some cash to shareholders when we jump over to their dividend per share chart well we can see and this these are annual charts they do pay them out four times a year but add those up

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For each year and we can see they have consistently increased their dividends year after year which for many investors this is a positive sign so if we’re considering ownership in microsoft stock this could be an interesting thing to consider so clearly if we like dividend investing them increasing their dividend is a strong sign now along those same lines and this

Brings us back to their cloud business microsoft has consistently pushed where they believe the future to be many things are going to the cloud amazon’s pushing there microsoft is also pushing there and when we saw their segment business before well clearly that part of their business is growing quite nicely in fact they break down their revenue even further by not

Just the not just broader segments but they also break it down by products sold here’s the chart of their revenue 2022 revenue by product and we can see that their server and cloud business is a the biggest portion of their business and this is a big change this particular division just launched in 2015 that’s when they really began to make a push towards this type

Of towards the importance of the cloud in their overall business and we can see that revenue in this business has ramped up quite nicely so we’re almost at we’re approaching a hundred billion dollars in revenue furry company as large as microsoft this is this is an impressive piece of their company that still has a decent amount of upside now when we go over to

Back to their individual products well one of the things that also i think is also important noting here is their gaming division so many of you may have heard that microsoft made a bid to acquire activision now i actually own shares in activision and i just wanted to bring out that this eight percent of revenue has the potential of jumping higher if they do in

Fact buy activision now i personally own chairs of activision and if you’re curious microsoft bought activision when the stock jumped right in this time period there was about a 25 jump in the stock price the day that they announced the data that it came out i’m not even sure they managed to announce that it’s the news got leaked and then the stock started rallying

And then they came out with a formal announcement shortly after that but i still own my shares of activision today now if you’re curious why the trend the broader trend for activision stock since the announcement has been lower well one of the reasons for that is there’s different regulatory bodies particularly there’s one in the uk right now that’s potentially

Standing in the way of this deal happening but from a from a overall revenue perspective for microsoft if they acquire activision great that it will help my activision stock and it will push that eight percent revenue that we saw even higher but if they don’t i still think that there’s plenty of positive signs for microsoft’s broader their broader business in

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Fact if we go back to some of the recent bullet points well clearly there’s plenty of good news right now for microsoft and with microsoft’s stock pulling back recently i think it now makes sense for us to switch over to discounted cash flow to see if microsoft’s worth investing in today so on the discounted cash flow calculator by the way by the way this is the

Website that i mentioned before you punch in the ticker up top and it kicks back a fair value we can see we’re getting a fair value of 243 per share right now that’s showing microsoft as being somewhat undervalued at the time of this recording the stock was about 234 and if it keeps falling this one could get even more and more interesting now for me on a personal

Basis when i think about about my broader investment portfolio microsoft is one of those companies i’ve wanted to own for a while in fact i did not think it would get back to this price because as the stock market has fallen microsoft has hesitated a lot more probably again because of all the things we’ve talked about so now that it’s down here this is one that i

Want to add to my investment portfolio but as is my sort of self-inflicted rule i have made it clear that i will only buy a stock after i make a video on it so this is that video microsoft is a stock i like it is a stock i would be happy to own for the next 20 years if you i believe if you could buy great companies at good prices and hold it for a long time let

Those compound on top of each other let the returns compound i think you could do quite well i think microsoft is a great company and i like the price that it’s at so as long as the stock stays down near these levels within the next few days i personally will be adding microsoft stock to my investment portfolio now if you’d like to sign up to get access to this

Website i will leave a link in the description below we got a link right here and thank you so much for sticking with me all the way to the end of the video i really do appreciate it thank you and i’ll see in the next video

Transcribed from video
Microsoft Stock Analysis – is MSFT Stock a Good Buy Today? By Learn to Invest – Investors Grow