Is Microsoft Stock a Buy Now, Despite a 30% Drop?

Microsoft Stock

Microsoft has significant potential in the cloud, gaming, and digital transformation areas, and with the devastating drop in Microsoft stock (NASDAQ:MSFT) price, this might be an excellent purchase opportunity.

Consider the Microsoft stock (NASDAQ:MSFT).

Microsoft Stock: The Bull Case

Microsoft stock (NASDAQ:MSFT) growth is driven by powerful global trends. Businesses are digitizing and moving their operations to the cloud, increasing demand for the tech titan’s productivity software and cloud computing services. Simultaneously, billions of people across the globe are moving to digital forms of entertainment, bolstering the popularity of Microsoft’s renowned Xbox gaming device and streaming options.

Microsoft is now a crucial facilitator of the megatrend of digital transformation. Despite the recent drop in its stock (NASDAQ:MSFT) price, long-term investors are better off.

Microsoft stock’s (NASDAQ:MSFT) significant returns to owners over the last half-decade have been driven by the company’s excellent financial performance. Over the last year, the digital behemoth has generated an astonishing amount of profit and cash flow, including $73 billion in net income and $65 billion in free cash flow. This excellent cash generation enabled Microsoft to lavishly reward its shareholders with share repurchases and a continually expanding dividend income stream.

Microsoft Stock: Risk For Investors

Many organizations are cutting down on technological spending due to concerns about a possible recession. Microsoft’s year-over-year sales growth has slowed to 12% in the most recent quarter, down from 18% in the previous quarter and 21% in the year-ago period. 

Nonetheless, the IT behemoth’s many business lines and fortress-like bank sheet should enable it to invest in its own operations during the present economic slowdown. This, in turn, should boost Microsoft’s competitive position against smaller, less financially solid competitors.

Microsoft Stock is Reasonably Priced.

Like many other IT firms, Microsoft stock (NASDAQ:MSFT) price fell dramatically in 2022. Following an almost 30% drop, its shares can now be purchased for around 23 times Wall Street’s profits forecast for this year and less than 20 times analysts’ forecast for next year. That’s a reasonable price to pay for a technical and financial behemoth that’s expected to increase revenues by more than 15% every year for the next half-decade.

Income investors will welcome Microsoft’s small but constantly expanding dividend. Its board of directors recently authorized a 10% raise in its quarterly cash dividend, raising its current yield to a reasonable (for a tech growth company) 1.2%.

So, is Microsoft Stock a Good Investment?

Microsoft stock (NASDAQ:MSFT) has several years of growth ahead of it because of its strong position in the cloud, gaming, and digital transformation megatrends. Although formidable competitors continue to offer problems, the computer giant’s entrenched position and financial strength should enable it to keep competition at bay in certain regions while expanding its footprint in others.

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About the author: Okoro Chinedu is a freelance writer specializing in health and finance, with a keen interest in cryptocurrency and blockchain technology. He has worked in content creation and digital journalism. Since 2019, he has written on various online platforms, and his work has been recognized by several important media sources and specialists in finance and crypto. In addition to writing, Chinedu enjoys reading, playing football, posing as a medical student, and traveling.