Investment Contrarians

Microsoft at 52-week High: What’s the Fuss?

By for Investment Contrarians |

Microsoft at 52 week HighApparently, someone forgot to tell the market that Microsoft Corporation (NASDAQ/MSFT) was a dead investment and not worth buying.

Following a lackluster launch of its “Surface” tablet and “Windows 8” operating system, Microsoft quietly moved to a new 52-week high of $32.84 last Thursday.

In its fiscal third quarter, Microsoft reported revenues of $20.49 billion, now on target for fiscal 2013 revenues of $79.16 billion, based on the Thomson Financial estimates.

My stock analysis indicates that the current uptick in the stock price is being triggered by optimism toward the company’s focus on touch-screen computing and mobile devices, along with greater demand for Microsoft’s “Xbox” gaming platform.

Revenues in the company’s entertainment and devices division surged 56% year-over-year to $2.53 billion. The company is set to launch its next-generation Xbox, with its “Xbox LIVE” currently having over 46 million subscribers worldwide, according to Microsoft.

The upward move in the share price and its sustainability will be dependent on whether this former darling of Wall Street can recapture some of its former glory, based on my stock analysis.

One thing is for sure: my stock analysis suggests that Microsoft is no longer the intriguing, can’t-miss stock that it used to be.

Microsoft is not Google Inc. (NASDAQ/GOOG).

My stock analysis suggests that for Microsoft to steadily move higher, the company will need to generate higher revenue growth than the current 7.4% and 7.9% that is estimated for fiscal 2013 and fiscal 2014, according to Thomson Financial.

Microsoft trades at a lower valuation than Google, but this is due to Google’s much higher estimated revenue growth rate of 43.0% and 15.1% for 2013 and 2014, respectively.

My contention is that Microsoft is still worth a glance, but it’s not on my radar.

Of course, if the company can grow its smartphone and tablet business, I will be more interested. But Microsoft is not there yet, and only time will tell if this company can ever deliver.

The only sure thing is that Microsoft, like many other companies, is struggling with the sliding demand of personal computers (PCs) due to tablets accelerating in popularity, based on my stock analysis.

If Microsoft fails to adapt to the industry shift, there will be little hope for this company. My stock analysis: it will not be easy for Microsoft to adapt.

The company will need to convert smartphone buyers into users of Windows-powered devices, moving users away from rival platforms including Apple Inc.’s (NASDAQ/AAPL) “iOS,” BlackBerry’s (NASDAQ/BBRY) “BB10,” and Google’s “Android,” based on my stock analysis.

Something has to be done. The market appears to be encouraged, based on Microsoft’s recent price move, but this optimism may not last if Microsoft fails to deliver the goods to investors and Wall Street.

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  • http://www.facebook.com/johncaville Gerry Doire

    Imagine how much Microsoft would make if they didn't screw things up all the time…….