Microsoft Corporation (MSFT) Stock is a Sure Bet to $80

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Shares of Microsoft Corporation (NASDAQ:MSFT) have pulled back recently amid the recent selloff in tech, driven by valuation concerns. It certainly didn’t help that Goldman Sachs essentially called a top in the tech sector, warning that the rally is poised to end.

Microsoft Corporation (MSFT) Stock is a Sure Bet to $80

Still, when looking at taking a position in MSFT stock, it’s tough to ignore the current and future value. The world’s largest software company, which also pays a solid annual dividend yield of 2.23%, is not going anywhere.

And, with more than $113 billion between its cash holdings and short-term investments, Microsoft’s balance sheet has enough firepower to sustain a stellar record when it comes to dividend growth. Not to mention, its payout ratio typically lies above 50%.

But, let’s assume Goldman Sachs is right about a tech selloff. MSFT stock, which is up just 12.5% year to date, versus returns of 25%, 32% and 74% from other tech giants such as Apple, Inc. (NASDAQ:AAPL), Amazon.com, Inc.(NASDAQ:AMZN) and Tesla, Inc. (NASDAQ:TSLA), respectively, is not likely to get hurt as much.

Plus, from my vantage point, MSFT — which has staged an impressive turnaround under CEO Satya Nadella — can still deliver some 15% returns over the next 12 months on its way to north of $80 per share.

Reasons to Love MSFT Stock

Once tied to the fledging PC market, the company has successfully carved out a position in the cloud where it generates higher profit margins and now competes more fiercely with Amazon and Alphabet Inc. (NASDAQ:GOOGL, NASDAQ:GOOG). Microsoft’s Azure cloud platform, second only to Amazon Web Services, is gaining greater adoption among fortune 500 companies and has proven to be a growing threat in the space. Strong execution and demand for its cloud-based services drove MSFT’s commercial cloud annualized revenue to a run rate of more than $15.2 billion in the fiscal third quarter.

With worldwide spending on cloud computing services expected to grow to $195 billion by 2020, according to technology market research firm IDC, MSFT is showing no signs of slowing down. As evidenced by its partnership with the National Cancer Institute, MSFT now has its sights set on the healthcare industry, where its cloud services could soon be used to deliver medical diagnoses. And it’s a smart move, too.

Healthcare spending on cloud services, which reached $3.73 billion in 2015 — driven by costs related to data storage, email and software systems that increase efficiency — is expected to surge more than 150% to $9.5 billion by 2020. All told, cloud companies like Microsoft will be expected to help reduce redundant costs associated with doctor visits for minor ailments.

While Amazon, Alphabet and other cloud giants like International Business Machine Corporation‘s (NYSE:IBM) Watson will fight for what is called the “telemedicine market,” the good news is the cloud pie is getting bigger. And, as a fast-growing cloud company and the No. 2 player in the industry, MSFT — thanks to the rate of adoption of Azure — is poised to get a bigger slice.

Bottom Line for MSFT Stock

Granted, a 15% return is not breathtaking. But, much of that has to do with Microsoft’s massive size and scale. But, assuming Microsoft can catch lighting in a bottle in the telemedicine market, the prognosis for MSFT stock will be even more optimistic.

For now, investors looking for a stock that is a combination of revenue growth alongside a solid dividend should look no further than Microsoft. Plus, from the standpoint of safety, MSFT can also shield from losses, assuming Goldman Sachs’ prediction becomes reality.

As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2017/06/microsoft-corporation-msft-stock-sure-be-80/.

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