In the face of a very challenging start to 2020 and as the coronavirus rages on, Microsoft’s [MSFT] share price has had a good run in the first quarter. What is the company doing to maintain this success?
In March Microsoft’s share price outperformed the broader S&P 500 index, climbing to gain 0.27% against the index’s 20% drop. At the time of writing the stock was above its 50-day moving average. Furthermore, Wall Street will be hoping for more good news as it awaits Microsoft’s next earnings report at the end of April.
Analysts currently expect earnings to be around $1.28 per share — the equivalent of a 12.28% year-over-year growth. For the full year, Zacks analysts are projecting earnings of $5.58 per share with a 11.64% revenue of $140.49bn. Earnings, however, are not the only impressive area for the tech behemoth. Microsoft’s share price valuation certainly doesn’t flatter to deceive either.
Microsoft’s forward P/E ratio is at a premium of 29.6. The industry average is reported to be around the 26.0 level — an impressive cushion in such a volatile global economy. As of the most recent quarter, which ended 31 December 2019, Microsoft boasted a 33.02% profit margin with an operating margin (TTM) of 36.74%. On top of that, the company reported an 11.38% return on assets (TTM) and a huge 43.83% return on equity (TTM). Impressive fundamentals for a company, and a share price, seemingly unwavering in the face of global crisis.
Here’s why Microsoft’s share price continues to deliver.
Aladdin and WalkMe collaborations
BlackRock [BLK] recently partnered with Microsoft Corp and agreed to move the Aladdin investment and risk management system to Microsoft’s Azure cloud platform — a huge client deal which will only further Azure’s staggering growth.
“Aladdin infrastructure deployed on Microsoft Azure’s cloud platform will provide BlackRock with enhanced capabilities to deliver the best outcomes for our Aladdin clients,” BlackRock COO Rob Goldstein recently said in a statement.
“Aladdin infrastructure deployed on Microsoft Azure’s cloud platform will provide BlackRock with enhanced capabilities to deliver the best outcomes for our Aladdin clients” - BlackRock COO Rob Goldstein
BlackRock and Microsoft will also be working collaboratively towards leveraging technological innovations to improve data and analytics around sustainability in the former’s investment portfolios.
BlackRock has been working hard to assure its investors’ environmental, social and governance (ESG) factors are driving its future-focused strategy. Having the ability to more easily identify and measure the ESG factors of companies before including them in portfolios will increase the level of trust between BlackRock fund managers and investors.
Microsoft has also partnered with WalkMe, the digital adoption platform provider. WalkMe is already connected with 2,000 companies using Microsoft software and has a strong 28.3% return in the past year, which massively outperformed the wider industry’s 8.6% growth.
WalkMe's returns in the past year
Both Aladdin and WalkMe are exciting prospects for Microsoft’s market expansion and diversification.
Continuing to invest in innovation
In order to remain at the top of a massively competitive market, Microsoft continues to heavily invest in innovation, leading the way in diversification. In its last earnings announcement CEO Satya Nadella (pictured) stated that the company was “innovating across every layer of our differentiated technology stack”.
Back in April 2018, Microsoft announced it would be committing $5bn to the Internet of Things (IoT) and “the intelligent edge” over the next four years.
Amount committed by Microsoft in April 2018 to the Internet of Things
The company has heavily hinted at a merger of augmented reality and virtual reality technologies, introducing the term “mixed reality”. Hologram technology, too, is becoming an increasingly viable invention — outside of action films. Microsoft’s HoloLens is being implemented by developers, armies, architecture, healthcare and construction.
Bolstering hardware production
With social distancing laws enforced globally, businesses and their workforces are constricted to working from home. While this is having huge ramifications on a variety of industries, technology and software have a whole new consumer base to cater to.
By improving video conferencing capabilities for remote users, Microsoft is smartly covering losses it may see in other areas of the business as the lockdown related to the coronavirus continues.
This proactive approach to business in the middle of a pandemic has done a lot to retain investor optimism in Microsoft stock. It remains to be seen whether this good run can extend through to the end of the year, but analysts are confident Microsoft stock will continue to remain attractive to investors throughout 2020.