I’ll go ahead and say it. Satya Nadella may have done more for Microsoft (NASDAQ:MSFT) than even Bill Gates. Ok. Maybe not. And he has certainly been a better CEO than Steve Ballmer. After all, Nadella shifted Microsoft into the cloud at just the right time when mobile and software-as-a-service (SaaS) was taking off. That move powered years of growth for Microsoft stock and helped make it a dividend powerhouse.
And Nadella is going to do it again.
It’s no secret that the novel coronavirus has brought healthcare back into the forefront of investors’, consumers’ and politicians’ minds. Just like before with the cloud, Microsoft is shifting heavily into the future of healthcare. With new cloud, artificial intelligence and big data solutions under its vast umbrella of services, Microsoft stock is preparing itself for more years of growth.
Microsoft Gets a Check-Up
One of Bill Gates’ more famous quotes deals with how technology can solve our problems. Right now, the spread of the coronavirus arguably is one of the biggest problems currently facing the planet. It has changed way we’ve done a lot of things. It has certainly changed the face of healthcare. It’s here, that Microsoft’s technology aims to help improve on a variety of outcomes for the sector.
In a quiet blog post, Mr. Softy announced that it launched its first industry-specific cloud offering — dubbed Microsoft Cloud for Healthcare.
The suite of SaaS products spans both patient and industry tools and covers the full range of MSFT products. We’re talking applications covering Microsoft 365, Dynamics, Power Platform and Azure.
For example, on patient side, healthcare providers can create tailored plans for individuals, send them daily reminders for treatments, host secure virtual visits, utilize chat-bots for quick assessments as well as remotely monitor patient health.
The industry side is equally as impressive. Not only will healthcare providers be able to access a secure cloud platform to coordinate patient care — via Microsoft 365 and Microsoft Teams — but they’ll be able to do some heavy data lifting as well. Thanks to the hefty addition of artificial intelligence, Microsoft hopes that its platform can be used for drug discovery and diagnosis. Not only will that reduce the time to create new medicines, but also eliminate doctor error, reduce waste and speed-up recovery times for patients.
Lots of Potential for Microsoft
In their blog post, Microsoft vice presidents Tom McGuinness and Gregory Moore wrote “Looking ahead, we expect to see healthcare organizations continue to use newly implemented technology tools throughout the recovery period and into the new normal.”
They are right on the money. And fortunately for Microsoft stock, the company will capitalize on this opportunity.
According to Microsoft, since March and the beta-testing of the platform, 31 million people globally have interacted with more than 1,600 Covid-19 bots for self-assessment tools on its system. All in all, there have been more than 34 million healthcare interactions on Teams as well. That’s very impressive considering that the healthcare platform didn’t “officially” roll-out. As it grows and more users tap into its system, MSFT could see some impressive growth down the road.
VEEV has long been the industry standard for drug developers to keep track of vital trial data, improve outcomes and deliver new drugs. Teladoc is quickly becoming the leading name in telemedicine. Both of these firm’s products are now in Microsoft’s wheelhouse. Last quarter alone, Veeva saw a big 38% year-over-year jump to revenues, while subscriptions jumped 36%. Over the last decade, the firm saw its revenues surge by over 244%. Teladoc’s growth is equally impressive — with total visits surging 92% during the last quarter as the Covid-19 pandemic has pushed telemedicine into the forefront.
I suspect that Microsoft could see similar, if not better rates for growth for its healthcare platform. The reason? Many hospitals and doctor’s offices already use its platforms for other needs.
Azure is already a giant for server applications, Excel rules administration needs and Office 365 is the standard when it comes to productivity tasks. This makes it very easy for a hospital administrator or CIO at a drug company to pivot into Microsoft’s Healthcare Cloud. Why add another SaaS firm to your stack and worry about integration, reporting etc. when you can use a system, you’re already familiar with?
This ability to pivot into additional sales should provide Microsoft with a long runway of added growth. The key is the firm’s massive scale. RBC Capital Markets analyst Alex Zukin highlighted this in a recent note, in which he said that Microsoft “continues to underscore the synergies that the ‘new’ Microsoft has been able to harvest over the last few years by knocking down traditionally silo’d fiefdoms and going to market with a cohesive, cross-product strategy.” Already, Microsoft reported a whopping “59% growth in its Azure business” during its last reported quarter. The healthcare cloud could add a significant boost to that growth.
Buying Microsoft Stock
With healthcare providing the next leg of growth for Microsoft’s stock, it is a big-time buy. The best part is that even with shares surging 15% over the last year, it still remains cheap versus its rivals. Right now, Microsoft can be had for a price-to-earnings ratio of 30. That’s right around its historical norm. This compares to Veeva’s P/E of 108. Meanwhile, we can’t forget Microsoft’s massive cash pile and steadily growing dividend.
For investors, the move into healthcare underscores just how Satya Nadella’s jump into the cloud was the right one. By offering specialty cloud applications to its already existing platform, Microsoft should be able to keep the growth going. That makes it open of the best tech stocks to buy for the long haul.
After given up early mornings and late nights as an analyst for a life of sweatpants, Aaron Levitt has been an investment/personal finance writer for nearly fifteen years. Aside from contributing to InvestorPlace, his work can be found on Investopedia, Kiplinger’s Personal Finance and Mitre Media’s family of websites. You can follow his picks, pans and general market musings on Twitter via @AaronLevitt. As of this writing, he did not hold a position in any of the aforementioned securities.