It doesn’t get as much press as Apple (AAPL), isn’t a Wall Street darling like Amazon (AMZN) or Netflix (NFLX), and its best days are most certainly behind it. But while the shine may have worn off of Microsoft Corp. (MSFT) in the eyes of the general public, its stock remains one of the steadiest performers in the investment world. Lately, it’s been more than steady – which is how it just became the third company ever to earn a $1 trillion market cap!
MSFT Stock on the Rise
Actually, MSFT stock topped the trillion-dollar mark back in late April, when it reached an all-time high of 130 per share. It retreated along with the rest of the market in May, but has rebounded sharply in the last week, jumping to new highs above 133. All told, MSFT stock is up 33% in 2019, better than the 18% increase in its native Nasdaq index. MSFT has also been a better stock than many of its more-publicized contemporaries in the tech world—including Apple, the company that more than a decade ago essentially replaced Microsoft as Wall Street’s top dog.
MSFT (+32%) has annihilated Apple stock (+1.5%) over the last year, and more than doubled its return in the last two years.
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Meanwhile, MSFT grew sales and earnings faster than Apple in each of the last two quarters, and has nearly double the cash in its coffers.
There’s been nothing particularly flashy about Microsoft’s comeback. The company’s sales have improved in eight of the last nine years, but never by more than 11%, though the company did just report 14% sales growth in its most recent quarter. Profit growth has been consistently in double digits of late. In both cases, Microsoft’s top- and bottom-line growth is either accelerating or holding steady.
Microsoft’s comeback has been built in large part on the success of its burgeoning cloud-computing business, which has a $20 billion run rate, putting it at roughly 20% of total revenue. It’s a strong new source of growth, if not necessarily exciting. And it’s becoming an increasingly dominant player in the cloud-computing market.
Microsoft Comeback Not Over Yet
Everything on Wall Street comes down to expectations. Earnings are measured not on their own merits, but in terms of how they compare to analyst estimates. High-growth companies get dinged when that growth starts to slow, even if it remains high compared to other companies of similar (or even smaller) size. And after years of outsized expectations, Microsoft started to feel like a disintegrating company after the 2008-09 recession.
But like many stocks that are on the wrong side of peak popularity, MSFT was overly punished by investors. At a certain point, Wall Street looked at Microsoft with fresh eyes, and realized that it remained a very strong, diversified, still-growing tech company. The trillion-dollar market cap is a reflection of that. And trading at fresh all-time highs, MSFT stock has given investors little reason to doubt it.
Bottom line: If you’re looking for a stock to buy and hold for the next 15 to 20 years, AMZN and NFLX are still better bets. But Microsoft stock makes for a nice comeback story, even if it no longer attracts the same attention.
Investment analyst and Chief Analyst of Cabot Wealth Daily, Chris Preston brings you all the latest from the investing world. Sign up to get updates and breaking news delivered FREE to your inbox. Get unlimited access to our library of complimentary investing reports.Sign up now!
*This post has been updated from an original version.