Is Microsoft Stock A Top Investment Right Now?

There have been many winners and losers during the COVID-19 pandemic, with Big Tech flourishing thanks to strong demand across the board.

Oct. 14, 2020

With Big Tech hitting all-time highs, many people are wondering if they are still viable investments. Microsoft (NASDAQ: MSFT) is one of the most reliable tech companies and it is an attractive stock for a lot of investors.

How has it dealt with COVID-19?

Microsoft has navigated the pandemic pretty well, posting better-than-expected fiscal fourth quarter results.

Two areas of its business that did not perform very well were LinkedIn, which saw revenue only rise 11%, and search advertising, which fell 17% due to lower rates.

However, total revenue for the quarter was up 13.6% up to $143 billion, with net income being $11.2 billion. Cloud businesses were a key driver of this growth, contributing revenue of more than $50 billion for the fiscal 2020 year compared to $38.1 billion the previous year. 

With the cloud market constantly growing across the board and looking like doing so for the foreseeable future, this is a massive driver for Microsoft. Microsoft is also investing for the future, putting $19.3 billion into research and development in fiscal year 2020. 

Comparison to other Big Tech stocks

Big Tech companies have benefitted massively from the pandemic, seeing their share prices appreciate significantly. 

Amazon has been the clear winner to date. At one point, its share price had doubled from the initial pandemic dip. It has benefitted from being the leading one-stop shop e-commerce marketplace while people have been stuck at home. Its cloud and digital advertising businesses have also been growing nicely. For its most recently reported quarter, its North America sales rose by 43.4% up to $55.44 billion, with its online grocery sales tripling. 

Facebook and Google both recovered from initial dips in digital advertising revenue to also see their share price grow massively. 

Finally, Netflix has been a big benefactor of people staying at home and consuming on-demand content despite growing competition from other streaming platforms. In the first half of 2020, Netflix added 26 million new paying subscribers, almost bypassing the 28 million new subscribers that got on board in the whole of 2019.

TikTok Deal: Bullet dodged or missed opportunity?

One of the hot topics in the tech space in recent months has been TikTok. The social media platform exploded in popularity prior to the pandemic and became the subject of much attention due to concerns about the security and President Trump seeking to ban the app in the U.S.

Microsoft was in talks to become the U.S. technology partner for TikTok, but its acquisition offer was rejected in favor of Oracle (NYSE: ORCL). Only time will tell if this was a bullet dodged by Microsoft or if it will be the one that got away.

Microsoft has been focusing on its enterprise software and cloud computing in recent years, so the acquisition of the social media app would have been a departure from these areas of focus. By staying with what has been tried and tested, it might work out better in the long run for the company.

What’s stock momentum like?

In share price terms, Microsoft has been consistently growing since the dip at the start of the pandemic. Its share price has risen by about 55% in this time period, hitting all-time highs of almost $233 at the start of September. 

The price has dipped slightly since, mostly in-line with the rest of the market due to growing uncertainty about COVID-19 as winter approaches and the U.S. presidential election.

Good investment now?

Microsoft certainly seems like a good investment right now. With more and more people working from home, tech companies like Microsoft can aid companies massively with this transition. 

The company is fundamentally strong and its cloud computing business looks like it will grow strongly in the coming years. Markets remain volatile, with further dips making Microsoft an even more attractive investment.

A MyWallSt subscription gives you access to over 100 market-beating stock picks and the research to back them up. Our analyst team post daily insights, subscriber-only podcasts and the headlines that move the market. Get your free access now!

MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.