Should You Buy MSFT Stock in 2014? Our Experts Weigh In

by Alyssa Oursler | December 20, 2013 11:37 am

As we head into the new year, we’ve already had InvestorPlace contributors taken a look at some of the biggest tech stocks — like Amazon (AMZN[1]) and Apple (AAPL[2]) — to predict how they will fare in the new year.

20132014YearEnd185 Should You Buy MSFT Stock in 2014? Our Experts Weigh In[3]But another big name in the tech world that can’t be overlooked is Microsoft (MSFT[4]). While usually considered an old-school operator, MSFT has been making quite a splash so far this year.

MSFT stock is beating the broader market year-to-date, while new Microsoft technologies — from the Xbox One to Windows 8 — have stolen headlines left and right. Sure, all the press hasn’t been good press — but it’s been “good enough” for MSFT stock.

But should you snag some shares of Microsoft stock heading into 2014, though — especially with the CEO role still up in the air? We went ahead and asked a few of our experts just that.

Take a look at what they think about MSFT stock in 2014.

Sentiment Should Drive MSFT Stock Higher

539 Should You Buy MSFT Stock in 2014? Our Experts Weigh InBy Dan Burrows

Microsoft (MSFT[4]) has become something of a tech-industry punchline, but MSFT stock actually had a heck of a year. More importantly, Microsoft stock looks like it could outperform the broader market in 2014, too.

MSFT stock is up 36% for the year-to-date, beating the S&P 500 by nearly 10 percentage points. Not bad for a company that’s become an also-ran in the most important revolutions in tech for years, notably search, social and mobile.

However, MSFT remains an enormously profitable company, and even though PC sales are slowing down as consumers opt for mobile devices like tablets, MSFT stock still benefits from the company’s dominant position among enterprise customers.

Microsoft stock also looks reasonably priced for new money, with the forward price-to-earnings multiple (P/E) of 12 offering only a slight premium to its own five-year average, according to data from Thomson Reuters Stock Reports. Additionally, MSFT stock comes with a generous and stable dividend, currently yielding 3.1%.

But the best reason to buy Microsoft stock for 2014 is that the company is seeking a new CEO, and if it lands the right person — like Ford (F[5]) CEO Alan Mulally — shares will get a lift on sentiment alone.

MSFT Stock Is Solid, Cheap

469 Should You Buy MSFT Stock in 2014? Our Experts Weigh InBy Tom Taulli
IPO Playbook[6]

I think there is more room on the upside for Microsoft (MSFT[4]), 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[5]) 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[7]) and 11X for Oracle (ORCL[8]). And Microsoft stock does sport a nice 3.1% dividend.

Stay Away from MSFT Stock

614 Should You Buy MSFT Stock in 2014? Our Experts Weigh InBy Adam Benjamin

Microsoft (MSFT[4]) has had a good run this year, outpacing the market for a 36% gain. But with Christmas and New Year’s around the corner, the real question is what 2014 has in store for MSFT stock.

Despite the stock’s performance this year, and the apparent progress MSFT is making in the tablet and smartphone spaces, Microsoft stock is not a buy for 2014. Here are the top reasons to stay away from MSFT stock:

Declining PC Industry: The PC industry is steeped in a rapid decline at this point, and considering that MSFT makes the majority of its money[9] in that sector (half of it from Windows licensing), that’s bad news for MSFT stock. Nor is it clear where the company is going to make back that money. Microsoft’s market share in the smartphone arena is growing, but Apple (AAPL[2]) and Google (GOOG[10]) still dominate the industry’s profits. And the company’s progress with tablets has been too slow, too unsteady to count on as a real revenue generator.

CEO Shakeup: MSFT is getting a new CEO in 2014, and while that might be a good thing for the company in the long-term, it will probably mean a more volatile stock in 2014. When new CEOs come in, it’s easy for investors (and analysts, and anyone else with an eye on the stock) to get jumpy about new changes, which can quickly knock MSFT stock in either direction. But until those changes result in stronger fundamentals for the company, any upward spikes can just as easily come crashing down.

MSFT stock isn’t necessarily doomed in 2014. And if you already own the stock, the 3.1% dividend probably makes it worth holding on to for now. But long-term industry headwinds and more immediate consumer challenges should keep new buyers away from MSFT stock.

As of this writing, none of the contributors held a position in any of the aforementioned securities.

Endnotes:
  1. AMZN: http://studio-5.financialcontent.com/investplace/quote?Symbol=AMZN
  2. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL
  3. [Image]: http://investorplace.com/hot-topics/best-of-2013-and-2014/
  4. MSFT: http://studio-5.financialcontent.com/investplace/quote?Symbol=MSFT
  5. F: http://studio-5.financialcontent.com/investplace/quote?Symbol=F
  6. IPO Playbook: http://investorplace.com/ipo-playbook/
  7. SAP: http://studio-5.financialcontent.com/investplace/quote?Symbol=SAP
  8. ORCL: http://studio-5.financialcontent.com/investplace/quote?Symbol=ORCL
  9. makes the majority of its money: http://apps.shareholder.com/sec/viewerContent.aspx?companyid=MSFT&docid=9567553#D594455D10Q_HTM_TX594455_2
  10. GOOG: http://studio-5.financialcontent.com/investplace/quote?Symbol=GOOG

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