Microsoft Corporation (NASDAQ:MSFT) had a promising start to the year. By January end, MSFT stock had gained more than 10% from this year’s opening price. But then MSFT slid. Now, on a year-to-date basis, MSFT is looking at a gain of 6.2%.
What happened? You can blame the broader market correction, which has disproportionately impacted the technology sector recently. For example, the sector benchmark Technology Select Sector SPDR Fund (NYSEARCA:XLK) lost about 9% during the February selloff, as did the S&P 500. (Though the tech sector appears to have fared worse during last week’s dip.) Given so many uncertainties, such as the China tariffs and geopolitical tensions, we’re likely to see more pain near term.
But through this turmoil, I’m increasingly confident that MSFT stock will fare better than most. Part of that confidence is due to the company’s multiple businesses. Unlike the lost and confused Microsoft of old, the new Microsoft has razor-sharp focus and isn’t afraid to take risks. What was once largely a software company has transitioned into a cloud computing, video-gaming and even a hardware-producing powerhouse.
It reminds me a bit of Amazon.com, Inc. (NASDAQ:AMZN) — at least in terms of management’s aggressiveness and killer instinct. More importantly, we’ve seen substantive results in MSFT stock over the past two years.
Once we work out the broader market correction, I’m looking for Microsoft to make the next big move: encroaching on Apple Inc.‘s (NASDAQ:AAPL) hardware sales.
MSFT Stock Isn’t Playing Around Anymore
Two weeks ago, I set up an appointment at my local Apple store for an iPhone repair service. While I was there, I noticed that all the Apple employees were using the iPad to conduct their business. This was great for looking hip and trendy, but when it came time to performing rudimentary tasks — such as looking up my name — the iPad was less than ideal.
The iPad’s cumbersome nature is beginning to show in the numbers. According to consumer technologies experts, global market share for Apple’s tablet computer has been relatively flat and is expected to remain flat at under 26% for this year and the next (Note:Paywall). By 2020, analysts forecast market share to drop to just under 23%.
Moreover, by the end of this year, tablet users worldwide will only increase 7.3%. In 2019, the growth rate over the prior year will sink to 6%. With Apple running flat in this department, and other product categories, Microsoft smells blood in the water; hence, my confidence in MSFT stock.
I don’t think it’s any coincidence that AAPL shares dipped into negative territory on a YTD basis. This is a firm that’s increasingly reliant on good ideas that they don’t have anymore. On the flipside, Microsoft is dishing it out against Apple’s once-vaunted hardware space, as our own Richard Band indicated.
More importantly, they’re winning. The company’s flagship Surface Pro earned rave industry reviews, and I’m not surprised. The iPad is a gimmick; perhaps that’s why TechRadar.com labels the Surface Pro a “productivity tablet.”
Microsoft Stock Has All Corners Covered
I think it’s fair to say that most of my InvestorPlace colleagues, when covering Microsoft stock, discuss its next-gen technologies. Of course, they have every reason to do so. Services such as the Azure commercial cloud solutions gives competitors migraines.
That said, I like to focus on the “old school” hardware arena because that’s Apple’s bread-and-butter. Several years ago, it was unthinkable that Microsoft would legitimately challenge Apple in this sphere. Now, Apple’s dominance doesn’t look anywhere near secure, which makes AAPL look overvalued. On the other hand, MSFT stock looks very attractive.
Slowly but surely, Microsoft is becoming a better Apple. MSFT has the same attractive physical stores, arguably better products, and most certainly, better ideas, if only for the fact that it has them.
But then you bring in all the factors that my colleagues mention and it’s a no-brainer. When the dust clears and the markets finally stabilize, I’m running for MSFT stock.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
