Investing in Microsoft: A Look at the Tech Giant’s Performance and Recent Developments
Popularly found in each office or household computer or laptop, Microsoft is one of the most popular tech companies in the world. With widely used products like Windows and Office, Microsoft has marked its presence in almost every computer and laptop across the globe.
The software giant Microsoft has done amazingly well in the last seven years since the Indian origin CEO Satya Nadella has taken charge. Its stock price had shown a major breakout since 2017 when major investors started to see fresh value addition in the stock and considered investing in Microsoft. That took its total returns since inception to 2,88,980%. Yes! You read that correctly.
Revenues from their products back these returns. Apart from Windows and Office, Microsoft offers many more products. They are –
- Consumer service software like Skype, and Outlook.com.
- Dynamic business solutions include financial management, supply chain management (SCM), customer relationship management (CRM), etc.
- Gaming platforms such as Xbox hardware and Xbox Live.
- LinkedIn, a social network for professionals.
- One, the Cloud Service such as OneDrive, and
- A web browser, Edge.
The above list is not exhaustive. With numerous products and leading-edge technologies, Microsoft is a tech giant that has given significant returns to its investors. While the company’s performance is likely to grow, how does one invest in Microsoft shares in India? Stockal has made it simple to invest in the US stock market for Indian investors.
Let’s go ahead and learn more about the performance before you plan on investing in Microsoft shares.
About Microsoft Stock
The shares of Microsoft are listed on the U.S. stock exchanges with a ticker name – MSFT. As of July 22, 2022, Microsoft stock is trading at $254.25. The five-year return of Microsoft has been around 298.90%, even though the year-to-date (YTD) return has been negative (13.54%) due to the rising inflation concerns and geopolitical tensions between Russia and Ukraine. However, while the tech-savvy Nasdaq has corrected and has given a return of only 1% in one year, Microsoft stock has returned more than 22.6% in one year. Compared to the index, this outperformance displays the Microsoft stock’s fundamental strength.
The stock chart of Microsoft since its listing is given below.
(Source: Google Finance)
Microsoft’s market capitalisation at the price level of $264.84 is recorded at $1.98 trillion. Their dividend yield is 0.94%, and their Price to Earnings (P/E) Ratio is 27.63 times.
The company’s stocks are technically and fundamentally strong, and the business of Microsoft is compelling.
What are the recent developments at Microsoft?
As far as the recent developments about Microsoft are concerned, the company has acquired three land parcels in Hyderabad with a vision to develop the largest data centre in India. This data centre will be in addition to the three major centres it has already set up in India in Pune, Mumbai, and Chennai. This is in line with their bigger plan to expand the data centre business in developing countries like India. The expansion can add a new source of revenue for the company.
Besides that, Microsoft has also successfully acquired Nuance Communications Inc, which develops speech recognition software, for a valuation of $19.7 billion. The company’s plan with this acquisition is to create personalised customer experiences. With the acquisition of gaming behemoth Activision Blizzard, Microsoft’s biggest acquisition yet for $68.7 billion, the company plans to grow its gaming business and will also play a pivotal role in building the metaverse.
Well, these recent developments seem promising and could likely make the company’s profitability higher in the coming years. So, should you buy the Microsoft shares as of today? Let’s find out.
Should you invest in Microsoft from India?
Today, many global investors are seeking opportunities from different financial markets around the world to earn superior returns. While the U.S. stock market has a higher potential for return on investment, Microsoft stock has always remained a safe choice for many among all Nasdaq stocks. It is one of the fundamentally strong stocks that must be on your radar.
The cloud platform, Microsoft Azure, has attracted eyeballs since increased migration to the cloud is aiding in demand for cloud computing, and web-based application performance is driving the demand for Microsoft’s cloud services. Microsoft reported a 50% year-over-year increase in Azure and other cloud services in the first quarter of fiscal 2022.
Besides, the overall performance also indicated growth as the revenue rose by 18% compared to last year to $49.4 billion, and net income rose 8% to $16.7 billion.
So, if you are planning to invest in Microsoft shares in India for the long term, there are certain benefits you would enjoy. Along with the superior returns that the US stock market offers, you can make the most of dollar appreciation. Meaning that if you invest Rs. 1,000 when the dollar value is Rs. 70, your investment will become Rs. 1,085.71 when the dollar appreciates to Rs. 76.
You can invest in Microsoft for either short-term profits or long-term gains. You must note that a short-term profit could be riskier than investing for the long term, and more often than not, staying invested for a long period in Microsoft has often provided more rewards than short-term trading. It is apparent from the stock chart provided above where you can see the trend of Microsoft shares.
Now you can make an investment of as low as $1 and accumulate Microsoft shares in small quantities for the long term with Stockal. If you’re still doubtful whether investing in Microsoft shares is still a good idea, then let us look at the benefits of investing in it below.
Benefits of buying Microsoft stock from India
Many rating agencies and top investment portfolio managers have a robust buy-and-hold view of Microsoft shares. The industry experts believe that the position of Microsoft is so strong that the risk involved is low. Since the investments are always assessed in terms of risk and reward, the probability of earning a higher reward from Microsoft investment is higher than the risk involved.
- Microsoft Azure is gaining momentum – The cloud business of Microsoft is now slowly bringing the heat to its competitor AWS (Amazon Web Services). According to reports, the share of AWS reduced to 69% from its previous 72%, while Azure increased to 59% from 48%.
- Other revenue gains and strong moat – The cloud business alone is not the sole cause as other business categories have also led to the growth, accounting for an overall sales of $51.9 billion through July 2022, which is up by 12% from last year.
- Sustained margins – Despite missing the street estimates, the company stock has surged 5% in the second quarter of FY22 and has forecasted double-digit returns in a sentence issued recently.
What does Microsoft’s financial performance look like?
Firstly, we shall discuss the results for Q1 of FY 2022 and proceed with a multi-year comparison. Microsoft’s revenue increased to $8.2 billion or 22%. The gross margin increased to $5.5 billion or 21%, contributed by all segments. Despite the rise in revenue, the net income was low. This was on account of increased expenditure for Q4. You can glance at the Q4 numbers from the comparative bar chart below.
Upon performing a comparative analysis of Microsoft’s performance on an annual basis, we can safely conclude that the company’s financial status is growing stronger each year. Year-on-year since 2018, Microsoft’s total revenue, gross profit, operating income, and net income have been consistently increasing. You can take a look at the extract of its Income Statement, Balance Sheet, and Cash Flow Statement from June 2018 through June 2021.
Numbers in millions (Source: Investing.com)
On closer look, you can find out that the net cash flows of Microsoft have not been remarkably consistent. However, it does not make a significant difference since the cash flows from operating activities have been positive throughout the period, with a rise in operating incomes as well. This indicates that the operating activities such as services, selling the flagship products etc., have generated consistent cash flows irrespective of the negative cash flows from investing and financing activities.
How to buy Microsoft shares from India?
Well, if everything you read so far has piqued your interest in considering investing in the company, then below are the ways in which you can do it if you’re in India.
You may invest in Microsoft from India by opening a brokerage account with Stockal. It is important to assess your risk profile as market fluctuations control share prices, and you may incur losses. Stockal’s method is simple, compliant, and rapid; it only takes a few minutes to complete. Your PAN number, a copy of your PAN card, and proof of address are a few documents required to create an account.
Another option for investing in Microsoft shares from India is to use an ETF. ETFs are a grouping of several equities or bonds that trade as a single fund. They are comparable to mutual funds. ETFs are traded on the stock exchange and offer a simple and inexpensive method to gain exposure to a certain industry or group of firms. ETFs can be purchased through Stockal that contain Microsoft stocks and traded on the exchange.
Stacks are pre-assembled bundles of stocks and ETFs in which you can invest. They are created by hedge funds, international asset management corporations, professional wealth management enterprises, and portfolio managers. For example, the US Tech Bluechip portfolio stack invests in pure technology internet firms that benefit from uptrends in hardware, software, internet, OTT, and Cloud – significant categories with competitive advantages.
Investing in mutual funds from India is another method. You can invest in a specific mutual fund that invests in such securities on a one-time or ongoing basis. The mutual fund’s fund manager is in charge of determining how much exposure each stock has.
These funds have a pre-designed portfolio of foreign business equities. They are also supervised by SEBI, just like any other mutual fund. However, this might wind up being more costly as the expense ratio will be higher.
To sum it up
Microsoft is a good investment option for a global investor from India since it allows geographical diversification. Along with that, if you invest in Microsoft shares from India, you get an advantage of dollar appreciation. As of July 2022, one stock of Microsoft is available for $264.84.
However, you do not need to invest that enormous amount in its shares. With Stockal, you can do fractional investing in US stocks( buying a fraction of a whole stock). Simply create an account and invest as small as $1 in Microsoft shares. You can keep accumulating fundamentally strong shares like Microsoft as and when the prices correct by tracking real-time prices on the Stockal app. However, ensure that you calculate your risks before making any investment.
Frequently Asked Questions
- How can I invest in Microsoft stock?
You can invest in Microsoft stocks and shares by opening a trading account on an easy-to-use platform such as Stockal. Stockal’s method is simple, compliant, and rapid; it only takes a few minutes to complete. Your PAN number, a copy of your PAN card, and proof of address are a few documents that are required.
- Can Indians buy Microsoft shares?
Yes, Indians are allowed to purchase a wide range of international stock options, including Microsoft (MSFT) shares. You can own Microsoft shares either by opening an account with Stockal and investing in stocks or ETFs through Stockal, or you can invest in mutual funds that have an exposure to Microsoft shares.