It’s a difficult time to be a cautious investor. With the stock market ticking ever higher and a contentious presidential election hanging over the future like a dark cloud, buying equities is tricky if you’re risk-averse. But the good news is that despite the stock market’s wild ride over the past six months, there are still some quality investments you can buy and hold onto. Microsoft’s (NASDAQ:MSFT) stock is one of them, despite the firm’s monumental rally over the past year.
MSFT stock is up nearly 40% from it’s March lows and has been slowly recovering after the tech sell-off of the past few weeks. There are a lot of big tech names that have become overinflated in the wake of the novel coronavirus outbreaks, which has led to the idea that the sector is in bubble territory. But Microsoft doesn’t fit into that category— it’s a solid long-term buy that looks likely to continue delivering to shareholders for decades to come.
MSFT Stock’s Future Growth Story
Gone are the days when Windows was the only growth engine for MSFT stock. While the operating system is still driving revenue for the company, Azure, its cloud computing platform is really the star of the show. The platform has become the second-largest by market share, and for good reason. The firm has won several important contracts, including a massive, multi-year contract with the U.S. Department of Defense.
Over the past year, Azure and Microsoft’s cloud computing arm have grown to surpass its personal computing business as the largest revenue driver.
Just being under the Microsoft umbrella, Azure has a powerful competitive advantage. MSFT’s many Windows and Office users can seamlessly transition their workspaces online using Azure which is a compelling argument for remaining within the MSFT ecosystem.
Plus, Microsoft has successfully shifted its strategy from offering traditional software licenses to a subscription-based model, which means the firm enjoys a consistent, predictable revenue stream.
Microsoft’s Gaming Plays
Since backing away from the mobile device business, Microsoft appears to have increased its focus on gaming— a move that will likely generate impressive growth in the near-term as the gaming industry continues to enjoy robust growth.
Throughout lockdown, the gaming industry saw a flurry of activity as new users flocked to various platforms. Plus, the lack of sports entertainment will likely drive further growth among esports— both viewers and players.
Also, research shows that cloud-based gaming is expected to take off as the 5G rollout continues, and gamers are excited about the enhanced experience they’ll get from the new technology. Microsoft is clearly aiming to capitalize on the improving gaming landscape— the firm recently acquired ZeniMax Media, a game developer.
Additionally, with gaming seen growing to become a $200 billion industry in 2021, Microsoft’s pivot toward its gaming sector looks like a solid bet.
Microsoft is a Buy-and-Hold Stock
On top of its strong position in several high-growth areas, Microsoft comes with solid revenue growth an healthy free cash flow. That means investors can be confident that the tech giant is well-prepared to weather any economic storms that could be on the horizon. More importantly, though, is the fact that MSFT has plenty of cash on hand to continue reinvesting in its growth, ensuring the firm will remain a formidable tech player well into the future.
The fact is, Microsoft makes for a good core holding because of its reliable growth and strong financials, but investors should also consider the fact that MSFT offers diversity as well. MSFT stock is a play on software-as-a-service, gaming, and cloud computing all rolled into one.
The Bottom Line on MSFT
MSFT stock has gained enormously on the back of the pandemic because it’s businesses are well-positioned to thrive in a world where people work remotely. But that doesn’t mean the firm will crash and burn in a post-pandemic world. Microsoft’s cloud and gaming plays are poised for growth under normal circumstances, the pandemic has only helped those businesses along.
Investors who want to keep their money in the stock market but are worried about a tech bubble should consider Microsoft for its strength and diversity.
On the date of publication, the author did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
