That’s a massive house flow margin, that few companies can match or even dream of. Furthermore, Microsoft consistently produces these high margins. Therefore, it is useful to project future FCF. For example, if the company paid out 100% of this FCF in dividends, its market valuation would likely end up with a dividend yield of 2%. Thus, dividing US$78.7 by 2% results in a forecast market capitalization of US$3.935 billion.
That represents an increase 26% on Microsoft’s current market capitalization of US$3,126 billion. In other words, the company’s stock could be worth up to 26% more than its current price per paperbut let’s see what the analysts consulted by Ambit.
Microsoft Cedear: time to purchase?
As the investment advisor explains well, Gaston Lentiniin statements to this medium “from the fundamental point of view, “All the big technology companies are generating new alliances, new developments in artificial intelligence and, above all, new profits,” Therefore, these levels, compared to those at the beginning of the year, are unthinkable.
Lentini maintains that “that’s the beauty of the market“, but warns that if to buy Microsoft today, his recommendation is “wait for it to exceed US$430, which is the last maximum of the stock, to be able to think precisely about an impulse that exceeds those values“.
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For the analyst, when comparing Microsoft with other large technology companies such as GoogleFor example, the situation is quite similar. Both are in all-time highs or very close and continue to generate, before each presentation of balance sheetsbest results. “That’s what surprises us all, all the analysts or many investors,” Lentini slips.
And it is no wonder, because as he points out Damian PalaisFinancial Advisor of Cocos Capital, Microsoft is a leading company in the technology sector and “the company with the highest valuation in the world“.
The potential of $MSFT
Palais maintains that this week Microsoft announced the launch of new computers and tablets designed by them, days after Apple, the company led by Steve Jobs, present your iPads that will go on sale shortly. Both companies present changes with respect to their predecessor devices, but Microsoft, under the vision of Cocos, shows more attractive improvements, linked to the operation of its tablets, since they mainly focused on generating strong integration with Artificial Intelligence.
In this context, the strategist asserts that regarding Microsoft’s share price, although it is trading at historical highs, which always presents hesitancy to buy, is that it is the most valuable company in the world above its competitors. For this reason, it could be considered that the US$430 per share would be justified, although with certain demands on the part of investorssince their valuations are above their historical averages, due to the latest quarterly results presented, where beyond exceeding market estimates linked to the company’s revenues and profits, they present double-digit growth in the core segments of the business (Microsoft Cloud, Office, Linkedin, Xbox Services).
Finally, and addressing the risks that must be taken into account when choosing a company like Microsoft to invest in, we must consider the competition of companies in the artificial intelligence sector. Palais indicates that the main technology companies (Google, Apple, Amazon, among others) They are developing their own Artificial Intelligence systems and although the company founded by Bill Gates is at the forefront of innovations in this field, Rapid advances throughout the segment pose strong challenges to maintain its leadership position.
