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Analysis of Microsoft shares

Analysis of Microsoft shares

24 October 2020

Microsoft is a global IT company. It is one of the largest companies in the world in terms of capitalization. The company produces software and various applications, and also owns the search browser Internet Explorer, EDGE, as well as a messaging and call service – SKYPE, although it is worth noting that after the purchase there is absolutely zero development and that is why you see all sorts of alternatives – Telegram. WhatsApp, Line, Discord, WeChat, Viber, etc. Also recently, she was involved in a muddy story with the then leader of the mobile phone market – NOKIA, which, through simple manipulations, she was able to buy for 5-10% of its real cost, while a) giving the opportunity to take place Iphone as a product, and therefore brought its the worst competitor to the Olympus of glory, b) completely lost the priority direction of mobile phones and platforms. As, however, everything that Steve Ballmer touches, a completely overrated and narrow-minded manager. The company’s business is divided into three segments – business processes (MS Office sales), cloud solutions (Microsoft Azure), personal computers (Windows operating system, Hardware business company – Xbox).

Facts of growth in the value of shares

The company’s revenue has been growing quite actively since 2014, as is the business’s EBITDA margin. However, at first glance, the strong volatility of the company’s net profit in recent years may seem strange. This is mainly due to tax changes in US legislation, and there is no reason to doubt the company’s ability to generate stable cash flows. Microsoft has negative Net Debt / EBITDA, therefore, we can conclude that the company is quite stable in its financial performance.

Separately, it should be noted that in addition to growing quotations, investors can also receive cash flows in the form of dividends – Microsoft pays dividends on a quarterly basis, and increases payments every year. A separate support for the company’s share prices is provided by fairly frequent buybacks of shares (over the last year, 54% of the cash flow was directed to buyback), which certainly plays into the hands of investors.

Our verdict regarding the company

The company has several promising areas – cloud solutions for businesses and households, game consoles (XBOX is perhaps the best of all their products) and hardware products (laptops, PCs and tablets under the Surface brand, for which the price tag is too high, but could become mass product and bring fabulous profits). It should be noted that in these segments, Microsoft is significantly inferior to competitors, so the company has room to grow.

To summarize, Microsoft is the market leader; the company’s products are highly diversified in terms of business and sales markets. Despite the company’s stable current position in the market, its full potential has not yet been realized, and is unlikely to be realized under the current leadership. Thanks to the large amount of cash in its accounts, Microsoft can open up new profitable directions for itself.

Aravana Capital Management provides clients with profitability even during downturns in the global equity and bond markets.

Aravana Capital Management provides clients with profitability even during downturns in global equity and bond markets.


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