Now that summer is coming to an end, that means it’s time to pull out your sweater, grab a pumpkin spice latte, and reevaluate your tech stocks. This series will help you decide what to do with your shares of the biggest names in technology – Apple, Alphabet, Amazon, Microsoft, Meta, Nivea and Tesla. Amazing seven. Next Microsoft is a leader in artificial intelligence.
Microsoft ( MSFT ) is a lot bigger than you think, and growing.
“This is the year for Microsoft where the aircraft carrier is at its peak, starting to accelerate based on the changes that have been made for some time,” D-Davidson analyst Gil Luria told Yahoo Finance.
Aircraft carriers are not built overnight. According to Luria, the transformation of the tech behemoth, now valued at more than $2.4 trillion, began when Satya Nadella took over as CEO in 2014.
“Microsoft was coming off 15 years of steady growth, while the business grew, but the stock didn’t,” Luria said. “They missed the shift to mobile, and at that time they were very behind the shift to the cloud. Then Satya Nadella took over.”
Immediately, Nadella sought to insulate Microsoft.
“It’s made it a much better integrated company in the software technology ecosystem,” Luria explained. “The second change he made was to be more developer friendly by using a more open source approach… and [making] A more constructive approach to business.
Today, Microsoft is ubiquitous and embedded in our digital lives through its cybersecurity, enterprise software, and cloud businesses. It is currently making inroads in search thanks to the company’s leadership in AI.
“The next big disruptive wave is AI, and Nadella understood that early on, that’s why they invested in open AI two years ago,” Luria said, “Not only did they invest in OpenAI, but they set the wheels in motion to adapt their business to AI.”
This does not mean that there are no scratches in the armor. Microsoft has been involved in several cyber security breaches this year, including which includes the Ministry of Foreign AffairsCompetitor CrowdStrike was quick to point it out.
“These ongoing developments highlight some of the systemic risks Microsoft poses to consumers, businesses and overall national security,” CrowdStrike Chief Security Officer Sean Henry told Yahoo Finance. “We must all have high expectations, and stakeholders across the security ecosystem must work together to restore trust in the security of critical systems.”
The nature of technology itself is also a threat to Microsoft. Whether the giant aircraft carrier can’t move fast enough or is derailing, AI and disruption could ultimately facilitate Microsoft’s downfall.
“Anytime there’s a big disruptive technology, it opens the door for new competitors and new businesses that build their business around the new technology, and we’re at that moment,” Luria said. “This is the biggest risk for all these big companies – but especially for Microsoft.”
So what should you do with Microsoft stock?
Still, as it is today, Microsoft’s AI-powered future looks bright. Currently, Wall Street analysts recommend Microsoft to 54 buys, six holds and one sell.
On Wednesday, Microsoft announced that it will do the same Increases the share of the quarter To $0.75 per share, a 10 percent increase from last quarter’s dividend.
The stock is up 37% year to date, which is unexpected on this year’s AI-fueled technical rally.
Aaron Fleishman, a Tola Capital partner who previously worked at Microsoft, told Yahoo Finance that Microsoft has built a strong position in this generational transition. The early partnership with OpenAI was a smart move that will pay dividends for years to come. Microsoft’s ability to monetize both the low-end consumption of Azure and the application layer with Office and other products makes the company a long-term leader, especially in AI.”
Investors may take pause at the valuation, but the stock is not yet in “runaway” territory.
“Microsoft is at the top of the valuation range, but not that high,” Luria said. A few years ago it was trading as high as 35 times earnings, and now we’re closer to 29 or 30 times.
According to Luria, if you’re looking at Microsoft, consider these three things: how creative AI is integrating tools into products, (and how) AI is driving cloud growth, and where the competition is emerging — and Microsoft seems armed. Take control.
If he can get all those engines roaring, that giant Microsoft aircraft carrier could go into hyperspace.
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