Microsoft Corporation (NASDAQ:MSFT) used to be generally considered as a safe stock that paid out dividends and helped in earning a steady income. It was not particularly known for delivering significant growth. However, over the past half a decade, the stock has engineered a remarkable turnaround and rallied by as much as 300%.
In such a situation, it is imperative to take a closer look at the stock and figure out the potential upside in the Microsoft stock. In order to get a better idea about the potential of Microsoft stock, it is important for investors to take a deep dive into the company’s business.
What to Expect Now?
The company continues to dominate the operating system market with Windows enjoying a market share of 80%. On the other hand, Microsoft has also cornered as much as 90% of the email and authoring market through Office. Office 365 and the subscription model has also been an important factor in the company’s continued growth.
The company also upgraded the offerings on Skype in order to compete against services like Skype. On the other hand, Microsoft’s cloud service Azure has grown considerably and is now firmly placed behind the market leader Amazon Web Services (AWS).
The company has also got a foothold in the gaming market with Xbox One, and its foray into the 2 in 1 laptop devices with Surface has also been promising. While Azure revenues rose by 39% year on year in the second quarter, the service faces a lot of competition from a range of companies.
On the other hand, its other businesses like Windows, Office, and Xbox One are also exposed to the potential market upheavals caused by the coronavirus pandemic. Analysts believe its earnings will rise by 18% this year, while the projected revenue growth stands at 12%. The stock trades at 30 times its future earnings, and while that is expensive, it is the sort of premium that many investors might be willing to pay due to the company’s strengths.