Why You Should Buy the Dip in Microsoft


Down 10% from its 52-week high, shares of Microsoft (NASDASQ:MSFT) look like a steal at current levels. As recently as March 14, MSFT stock was trading at $275 per share, which was 21% below the stock’s high water mark of just under $350 reached last November.

The Microsoft (MSFT) logo on a corporate office building during the day time.

Source: The Art of Pics / Shutterstock.com

While the stock has since rebounded and is now trading around $310, it remains comfortably below its 52-week high. This provides an attractive entry point for investors who want a big tech growth stock that is a reliable long-term bet.

Despite a fair bit of market turbulence, MSFT stock has gained nearly 34% in the last 12 months and is up 377% over the past five years. The company continues to be one of the best-performing technology stocks in the market, delivering solid returns in good times and bad.

MSFT Stock Has Diversified Revenue

Despite being around since the dawn of the personal computer in the 1970s, Microsoft remains vital to the industry. The key to the company’s success is its culture of innovation and constant renewal of existing products. It also benefits from its diversification into new businesses and focus on enhancing its revenue streams.

These attributes were on full display earlier this year when Microsoft announced its $68.7 billion takeover of video game maker Activision Blizzard (NASDAQ:ATVI). The acquisition gives Microsoft ownership of popular video game titles such as Call of Duty and Candy Crush. Just as importantly, it brings video game development inhouse for the company behind the popular Xbox video game console.

Microsoft also updated and enhanced several core and new product offerings during the pandemic. When people were forced to work and attend school virtually from home, it became an indispensable part of many people’s daily lives.

The company aggressively enhanced and marketed Teams, its virtual meeting platform. Microsoft also enhanced its Office 365 software, giving it stronger cybersecurity features and beefing up many of the more popular applications such as Outlook.

Microsoft is now in the process of raising the subscription fees it charges for Office 365, increasing the annual price for its 365 Business Premium package to $22 from $20 previously. A loyal and long-term customer base gives Microsoft the ability to raise prices without losing a significant amount of business.

Microsoft’s Cloud Computing Segment

While Microsoft is a diversified company with established software and hardware, its biggest business unit by revenue is its Azure cloud computing segment.

Azure is currently locked in battle with Amazon Web Services (NASDAQ:AMZN) for the top spot in the industry, which is forecast to be worth more than $1.5 trillion by 2030. The platform now offers more than 200 products that are used in a variety of industries ranging from banking to healthcare.

In the first half of Microsoft’s fiscal 2022, the company’s cloud computing segment earned $35 billion in revenue, growing at a rate of 28% year-over-year and besting the company’s total annualized revenue growth of 21%.

As with other parts of its business, Microsoft has been taking steps to enhance the security of its Azure cloud services. Last year, it acquired CloudKnox Security, which offers cloud infrastructure entitlement management (CIEM) technology.

Microsoft also bought RiskIQ, which provides threat intelligence and attack surface management. Taken together, these acquisitions strengthen the company’s cloud offerings at a time of heightened cybersecurity awareness.

Buy MSFT Stock

After nearly 50 years of continuous operation, Microsoft remains a leading technology company and its stock continues to be a top-notch security. While the share price is recovering, it still has plenty of room to run.

Among 36 analysts who cover the company, the median price target on the stock is $370 a share, implying 19% upside in the coming months. A diversified company that is a market leader in everything from software to video games and cloud computing, Microsoft is a solid blue-chip stock that would be a worthy addition to any portfolio.

On the date of publication, Joel Baglole held a long position in MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines

Article printed from InvestorPlace Media, https://investorplace.com/2022/04/why-you-should-buy-the-dip-in-msft-stock/.

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