The extent to which stock prices change over time is important to most investors because price performance both affects your portfolio and helps you compare investment results across sectors and industries.
Another factor that can drive investment is the fear of missing out (FOMO). This especially applies to tech giants and popular consumer-facing stocks.
What if you invested in Microsoft (MSFT) ten years ago? It might not be easy to hold on to Microsoft Financial Services, but if you did, how much would your investment be worth today?
Microsoft business in depth
With that in mind, let’s take a look at Microsoft’s key business drivers.
Microsoft Corporation is one of the world’s largest broad-based technology providers. The company dominates the PC software market, with a market share of over 73% in desktop operating systems.
The company’s Microsoft 365 suite of applications is one of the most popular productivity software in the world. It is also one of the prominent public cloud providers that offers various Infrastructure as a Service (IaaS) and Platform as a Service (PaaS) solutions at scale.
Headquartered in Redmond, Wash., Microsoft’s products include operating systems, cross-device productivity applications, server applications, business solutions applications, desktop and server management tools, software development tools and video games. Its software solutions and hardware devices play an important role in the development of the Metaverse.
The company designs and sells personal computers, tablets, gaming and entertainment consoles, other smart devices, and related accessories. Through Azure, it provides cloud-based solutions that provide customers with software, services, platforms and content.
Microsoft reported fiscal 2023 revenue of $211.9 billion. The company reports its business into three segments: Productivity and Business Processes, Intelligent Cloud and More Personal Computing.
Productivity and business processes accounted for 32.6% of fiscal 2023 revenue. The segment provides productivity and collaboration tools and services, including Office 365, Dynamics Business Solutions, Teams, Relationship Sales Solutions, Power Platform and LinkedIn.
Smart cloud, including Azure cloud services, contributed 41.4% of revenue in fiscal 2023.
In January 2022, the company signed a final agreement to acquire Activision Blizzard. This acquisition will accelerate the growth of Microsoft’s gaming business in mobile, PC, console and cloud gaming. Microsoft and Activision Blizzard have mutually agreed to extend the merger agreement until October 18, 2023 to allow more time to resolve remaining regulatory issues.
More personal computing accounted for 25.8% of fiscal 2023 revenue. This segment mainly includes Windows, games (Xbox hardware and Xbox software and services), devices (Surface, PC accessories and other smart devices) and search (Bing and Microsoft Advertising) businesses.
bottom line
Putting together a successful portfolio requires a combination of research, patience and a little risk. In the case of Microsoft, if you bought shares a decade ago, you’d probably feel very good about your investment today.
According to our calculations, a $1000 investment made in March 2014 would be worth $10,543.76 as of March 21, 2024, or a gain of 954.38%. This return excludes dividends but includes price appreciation.
In comparison, the S&P 500 Index rose 179.09% and gold rose 57.38% during the same period.
Analysts also predict greater upside for Microsoft Financial Services.
Microsoft is relying on strong growth in smart cloud and productivity and business processes. Smart cloud revenue was driven by the growth of Azure and other cloud services. Productivity and business process revenue continue to grow due to widespread adoption of Office 365 business solutions. Revenue growth was driven by continued growth momentum in products for small and medium-sized businesses and frontline workers, as well as revenue per user growth. Microsoft has taken an early lead in the generative AI race thanks to its partnership with OpenAI. Universal availability of Copilot for Security is expected. We expect fiscal 2024 net sales to increase 14.6% compared to fiscal 2023. However, more personal computing revenue was affected by continued weakness in the Windows and device businesses. Declining gaming revenue has been a headwind.
The company’s shares have risen 5.73% in the past four weeks, and there have been 17 upward revisions to fiscal 2024 profit estimates in the past two months, without a single downward revision. Consensus estimates also rose.
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