Source: PaxForex Premium Analytics Portal, Fundamental Insight
The concept of "buy and hold forever" is a bold one, as very few stocks truly merit such unwavering commitment. However, technology giant Microsoft stands out as one of the rare exceptions in this regard.
This distinction stems from a combination of its impressive track record, promising prospects, and robust financial performance. Below, we'll delve into the reasons why investing in Microsoft stock and retaining your shares indefinitely could be a wise move.
Microsoft's roots trace back to the earliest days of personal computing. Today, its flagship operating system, Windows, continues to dominate the market, complemented by several other key businesses that contribute significantly to the company's revenue streams. Microsoft's products and services are organized into three main business segments:
- Productivity and Business Processes: Includes Microsoft 365 software, LinkedIn, and Microsoft Dynamics.
- Intelligent Cloud: Encompasses Azure, cloud services, and enterprise services.
- More Personal Computing: Involves Windows software, gaming, Bing, and Edge.
Microsoft has established itself as a leading competitor (or a key player) across various industries. Windows maintains a commanding 72% share of the desktop operating system market, while the Microsoft 365 software suite enjoys widespread adoption in the corporate sector. Azure ranks as the world's second-largest cloud platform, boasting a 23% global market share. Moreover, Microsoft has a significant presence in the gaming industry through its PC offerings and as one of the few major gaming console manufacturers.
These achievements translate into a robust business generating $227 billion in sales and $67 billion in free cash flow. Microsoft's strong cash flow position has enabled it to become a reliable dividend growth stock. Despite its staggering valuation of nearly $3 trillion, the company continues to grow at a healthy mid-teens rate. In the second quarter of Microsoft's fiscal year ending December 31, total revenue surged by 18% year over year.
Microsoft's ascent to technology supremacy is no stroke of luck; it's the result of strategic foresight and impeccable execution. One of Microsoft's recent demonstrations of this skill is its collaboration with OpenAI, the organization behind ChatGPT, which rose to prominence last year. However, Microsoft's involvement with OpenAI dates back to 2019, and this partnership has flourished, with Azure emerging as the exclusive cloud provider for OpenAI's computing needs.
This collaboration presents a significant growth opportunity, particularly as OpenAI, under the leadership of Sam Altman, ventures into new projects like Sora, a text-to-video engine, and humanoid robotics through its partnership with Figure, a robotics company.
Moreover, Microsoft has introduced Copilot, an AI-powered digital assistant that could potentially disrupt the traditional search engine model dominated by Alphabet's Google for the past two decades. While the extent of Copilot's impact on Microsoft's growth is yet to be fully realized, the company is well-positioned to capitalize on the transformative potential of AI if it proves to be as significant as anticipated.
Every company encounters challenges, but it's their level of preparedness that distinguishes those worth retaining from those to discard. Microsoft arguably stands as one of the most financially robust businesses globally. This is evident from its remarkable cash flow generation, surpassing the annual sales figures of most companies by reaching $67 billion.
The consensus among industry experts further reinforces Microsoft's financial strength. Major credit rating agencies have bestowed an AAA rating upon Microsoft, a distinction shared only with one other company worldwide, Johnson & Johnson. Notably, Microsoft's rating even surpasses that of the US government, which holds the ability to indirectly create unlimited money through the Federal Reserve.
In the event of a governmental financial crisis, our investment portfolios might be the least of our concerns. Microsoft's superior credit rating underscores its exceptional standing in the market. It takes an extraordinary company to justify a long-term investment strategy, and Microsoft undoubtedly fits that bill.
As long as the price is above 400.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 424.48
- Take Profit 1: 435.00
- Take Profit 2: 455.00
Alternative scenario:
If the level of 400.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 400.00
- Take Profit 1: 390.00
- Take Profit 2: 375.00
