MSFT Stock Is Solid, Cheap
By Tom Taulli
I think there is more room on the upside for Microsoft (MSFT), because the company still knows how to create software at scale.
For example, Microsoft has offerings like Dynamics ERP and Dynamics CRM, as well as infrastructure systems like Azure. MSFT has also made some smart acquisitions. Skype allowed the company to get a foothold in the massive global communications market, while Yammer was a way to break-into the valuable social networking game for businesses. And on the cloud side, MSFT has SkyDrive, which is for online storage. Oh, and Office 365 seems to be getting lots of traction.
I also think MSFT stock could get a boost because Microsoft is getting a new CEO. While Steve Ballmer should be commended for helping to build the company into a powerhouse, he has not been the right person to win in the mobile world. This will take someone with a fresh perspective — and who can make tough decisions. Ford’s (F) Alan Mulally seems like the leader who could pull this off and keep MSFT stock climbing.
But whoever the person is, it will help that MSFT has already invested heavily in the Windows mobile platform and that there will be much more infrastructure because of the Nokia acquisition.
For the cherry on top, MSFT stock is pretty cheap. The forward price-to-earnings ratio is 12X, which compares to 22X for SAP (SAP) and 11X for Oracle (ORCL). And Microsoft stock does sport a nice 3.1% dividend.