Microsoft (NASDAQ:MSFT) stock is up over 10% after the company reported a beat on both earnings and revenue in its latest earnings report on April 29. About two weeks prior to Microsoft’s earnings report, Brad Moon told InvestorPlace readers that the time to buy the dip in Microsoft stock appeared to be ending.
At that time, Microsoft was climbing off the low of $135.98 it reached at the depths of the pandemic-induced selloff. The consensus 12-month price target for Microsoft stock was $188.90 then, which was a 14% gain. Since the release of its earnings report, Microsoft’s price target has moved up, but only fractionally to $190.39.
At that level, it would put the stock just below its all-time high and just 1.55% above its current level. So is now a time to jump in on Microsoft stock?
Microsoft Teams Gains Users
The Covid-19 pandemic was the prime mover in getting businesses to make the investment in collaboration software that allowed their employees to work remotely. This has been a catalyst for Microsoft and its group collaboration tool, Teams.
On March 18, Microsoft announced that it had added 12 million new daily active users (DAUs) to Teams. This raised the total users to 44 million. However, when it comes to the work from home movement, there’s more than one option. A direct competitor to Teams is Slack (NYSE:WORK) which had an entrenched base prior to the pandemic.
Another catalyst for Microsoft has been its Skype video conferencing tool that has seen a 70% increase in use during the pandemic. However, Skype also faces competition from Zoom Communications (NASDAQ:ZM). Zoom also saw a huge increase in adopters for its video conferencing tool.
Zoom suffered from a number of well-publicized issues that raises questions about its security and privacy. And in an article in Forbes, Kate O’Flaherty wrote how Microsoft was using the slip-up as an attempt to steal market share from Zoom. But O’Flaherty also remarks that the move by Microsoft may not have the affect it is hoping for. That’s because when it comes to collaboration software, functionality may take precedence over a potential security risk.
American Businesses May Have Chosen Their Work Teams
A recent Gallup poll suggests what many analysts already suspect. Even as the economy re-opens, there are many Americans who would prefer to work from home. And it’s not just because they may be afraid of being exposed to the virus. Many people are realizing that they are more productive working at home and that the absence of a commute is improving their quality of life.
But just because many workers may decide they want to work from home does not mean the company will switch the software they use. Microsoft certainly got a nice bump at the outset of the pandemic.
Jake Moore, a cybersecurity specialist at ESET, says Microsoft’s effort to take advantage of Zoom’s struggles may have some affect. However, Moore also points out, “It may take a lot more to make people move across (platforms).”
The Final Word on Microsoft Stock
I agree with my InvestorPlace colleague Laura Hoy, Microsoft is a great business. Chances are that either through Microsoft Office, Windows, LinkedIn, Skype, Teams, or other Microsoft touch points, you use a Microsoft product. And the company is only going to grow its Azure cloud business and is even making in-roads with its Edge browser. The long-term future for the stock is outstanding.
However, with the economy likely already headed for a recession at least, and possibly a depression, there is a reason to wonder how much growth there is for Microsoft in the short-term. With its earnings report in the rear view mirror, the stock doesn’t have any near-term catalysts.
Stocks do take on a life of their own. And I’ll admit that Microsoft stock will keep going up until it doesn’t. However, I think now would be a time to hold your position on Microsoft stock and wait for the stock to show that it has a fundamental reason to move higher.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019. As of this writing, Chris Markoch did not hold a position in any of the aforementioned securities.
