Shares of Microsoft Corporation (NASDAQ:MSFT) continue to look undervalued, even though MSFT stock has been on a steady climb since the start of the year.
Fairly or not, Microsoft has gotten lost in the shadows of other tech giants such as Apple Inc. (NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN) and Tesla Inc (NASDAQ:TSLA), which are all trading at all-time highs.
But, the world’s largest software company, which also pays a solid annual dividend yield of 2.23%, can deliver some 20% returns in the next 12-18 months on its way to north of $80 per share.
Reasons to Love MSFT Stock
MSFT stock closed Friday at $69.97. The stock has risen 12.5% year to date and 33.7% over the past twelve months, besting the 7.9% and 15.1% gains, respectively, in the S&P 500 index. Microsoft has staged an impressive turnaround, soaring some 90% under new CEO Satya Nadella, beating the the Nasdaq Composite index, which as risen about 50% during that span.
Once tied to the fledging PC market, the company has successfully carved out a position in the cloud and now competes directly with Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG). Plus, MSFT shows no signs of slowing down.
At its Build developers’ conference last week, management announced several new products and features, including the Windows 10 Creators update, which Microsoft said is coming this fall. This is a highly-anticipated update because it touts the ability for consumers to bring Windows with them wherever they go.
Microsoft said the new feature will allow users, for instance, to start a Word document on their desktop computer and finish it on their Surface tablet. If it sounds similar to the hand-off feature on iOS/MacOS platforms, it is.
But, here’s the thing: Microsoft will also allow users to start a Word document on their Surface tablet and pick it up or finish it on an Apple iPad or iPhone. The company wants users to be able to access their Microsoft task anywhere at any time, regardless of platform. Likewise, in terms of its online storage service OneDrive, users will soon be able to access their cloud-stored documents without having to first download them.
And, that says nothing about MSFT’s new partnership with Harman International, a subsidiary of Samsung Electronics (OTCMKTS:SSNLF), where both companies are working together to roll out a voice-activated speaker that will be powered by Microsoft’s Cortana virtual assistant. This, too, is seen as a direct attack on Amazon.
Assuming these new features help Microsoft gain increased traction with consumers, while Microsoft’s Azure cloud platform — second only to Amazon’s Amazon Web Services — continues to gain traction with Fortune 500 companies, MSFT stock will continue to move higher.
Bottom Line for MSFT Stock
Investors who are looking for a potential breakout candidate that offers a combination of revenue growth and a solid dividend should look no further than Microsoft. MSFT stock won’t impress with breathtaking returns in the near term, but much of that has to do with the company’s massive size and scale.
However, with some $121 billion in cash on the balance sheet, MSFT stock is not only safe, but also on the verge of strong growth driven by the investments Microsoft is making in its ecosystem.
As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.
