Image Source: Mike Mozart
By Brian Nelson, CFA
Microsoft (MSFT) hasn’t been a tech dinosaur for many years now, and its first-quarter fiscal 2024 (calendar third quarter 2023) results continued to show just how well the tech giant has adapted to the new economy–from the cloud to gaming to personal computing and, of course, to getting a lead in artificial intelligence [AI] with its investment in OpenAI (ChatGPT). During its fiscal first quarter, Microsoft’s revenue advanced 12% in constant currency, while operating income leapt 24% holding foreign exchange constant—breakneck levels of expansion. Azure and other cloud services sales advanced 28% on a year-over-year basis holding currency constant. The high end of our fair value estimate for shares stands at $368, and we wouldn’t be surprised if Microsoft’s equity returns to those levels in the near term.
The software behemoth’s net income and diluted earnings per share both surged 26% in constant currency during the fiscal first quarter, too, and we’re huge fans of the company’s growth rates. The results far outpaced what the Street was looking for on the top and bottom lines, and we continue to love shares of Microsoft as a holding in both the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio. All this good news, and Microsoft is still just scratching the surface with its opportunity in AI across its product line-up. Though many continue to be concerned about the strong run-up that big cap tech and large cap growth have experienced so far in calendar 2023, we think these areas, of which Microsoft is a key component, will continue to be strong relative performers in a market dealing with higher interest rates and stubborn inflation levels.
NOW READ: There Will Be Volatility
———-
Brian Nelson owns shares in SPY, SCHG, QQQ, DIA, VOT, BITO, RSP, and IWM. Valuentum owns SPY, SCHG, QQQ, VOO, and DIA. Brian Nelson’s household owns shares in HON, DIS, HAS, NKE, DIA, and RSP. Some of the other securities written about in this article may be included in Valuentum’s simulated newsletter portfolios. Contact Valuentum for more information about its editorial policies.
Valuentum members have access to our 16-page stock reports, Valuentum Buying Index ratings, Dividend Cushion ratios, fair value estimates and ranges, dividend reports and more. Not a member? Subscribe today. The first 14 days are free.