Microsoft's [MSFT] share price has rocketed during the coronavirus outbreak, with its video conferencing platform, Teams, helping to fuel demand for the stock. The product has seen an impressive growth in user numbers as businesses have been operating remotely throughout the lockdown period.
However, this has also put Microsoft in direct competition with Slack [WORK] and Zoom [ZM] and, with Global Market Insights suggesting that the virtual meeting space market could be worth $50 billion by 2026, it’s a competition worth winning.
So, will Microsoft's share price continue to see gains? Or will it be trumped by a rival in the video conferencing turf war?
What's happening with Microsoft's share price?
Microsoft's share price is up 29.7% so far this year (through 14 July’s close). Like virtually every other stock on the market, it experienced a wobble in March as the coronavirus took hold. Since then, however, Wall Street has been betting heavily on the stock.
While Microsoft's share price performance is impressive, it pales in comparison to some of its rivals. Slack's [WORK] share price is up circa 50% this year and Zoom's has skyrocketed 278%. However, the strength of Microsoft's underlying business could make it more resilient to the possible drop in video conferencing business when companies require their staff to return to the office.
Microsoft's YTD share price rise versus Zoom's 278%
How has Microsoft cornered the video-conferencing market?
Microsoft Teams has seen strong user growth as coronavirus restrictions demand meetings take place at home. With many employees likely to continue working from home in some capacity post-outbreak, the demand for Teams is likely to remain high, and could spell continued good news for Microsoft’s share price.
In its Q3 earnings results, Microsoft said that Teams was seeing 75 million daily active users. The tech giant also revealed that it hosted 200 million meeting participants on a single day in April.
Microsoft has a strong position compared to the likes of Zoom and Slack. Teams comes out of the box with Office 365, which has over 258 million paid seats. That makes it an easy choice for businesses, especially those caught unawares by the pandemic.
Microsoft Team's daily active users as of Q3 earnings results
What's Microsoft's competition?
None of this is to say that Teams is leaving its competition too far behind. Slack's share price is up 40.6% year-to-date through 14 July’s close as companies, and tech companies, in particular, use the work-based messaging app to communicate.
In a rare acquisition, Slack picked up Rimeto, which offers employees insight into the people they collaborate with. While it might sound a little Orwellian, news of the acquisition sent Slack's share price up 8% Wednesday 8 July.
Not to be outdone, Zoom has said that it will team up with several hardware manufacturers to streamline its app. Zoom's share price is up circa 280% so far this year, but its business is nowhere near as diverse as Microsoft. This could see it slip as the world eases out of lockdown.
Slack's share price rise YTD 14 July
What else could boost Microsoft's share price?
Microsoft will soon add a new feature called Together to its Teams platform. This allows up to 50 participants to gather in virtual spaces. This could take the form of an online auditorium for a company town hall or a coffee shop for a virtual chat. Whether this move is more a PR stunt than a practical addition remains to be seen. The news that Teams was getting new features alone was enough to fuel Microsoft's share price gains last week, though.
Microsoft’s share price is benefiting from impressive growth in its cloud computing product, Azure. Like Teams, Azure has benefitted from the shift to working from home and the demand for cloud storage.
That said, it’s not all good news for Microsoft’s share price; headwinds include reduced ad spending on LinkedIn and Bing.
Of the 34 analysts tracking Microsoft on Yahoo Finance, 14 rate it a Strong Buy and 13 rate it a Buy. Despite this, an average $206.67 price target would only see a slim 0.8% upside on Microsoft's share price through 14 July’s close.
|PE ratio (TTM)||34.76|
|Quarterly Revenue Growth (YoY)||14.6%|
Microsoft share price vitals, Yahoo Finance, 15 July 2020