When Will Microsoft Stop Winning?

29 ม.ค.

Hey guys!

A few weeks ago, we put out a bearish idea on Microsoft. MSFT

As you may have guessed, it was relatively poorly timed. While the stock took a break from rallying, it only took a couple of weeks for shares to continue their march higher into earnings season:



In fact, the company reports earnings tomorrow, and we're expecting another beat & raise, which has been the trend over time as MSFT products gain momentum, Azure continues to crank out cash, and Bing & ChatGPT represent the next leg up for the company.

All in all, the stock seems destined to be in 'only-up' mode forever.

However, this has to stop at some point. The stock cannot continue this march into infinity, and the growth trajectory of the stock WILL slow down, which should send the multiple back to the 15s-20s which is where it has traded historically.

Is that time now?

Probably not.

In our view, Fair Value for MSFT shares is somewhere around $285-$350 per share, which is below the current price near 410, but the momentum is so strong that it's unlikely we'll see the projected Fair Value zone anytime soon.

That said, this is one to keep an eye on, as many of the multiples are beginning to look very stretched, and the company has stopped buying back shares as aggressively:



Stepping in front of this freight train on the short side seems like a poor decision, but we can't help but think that as MSFT continues to make new high after new high, with the stock getting further and further ahead of the company's growth, that this is a 'good price' to exit at.

If you own MSFT, you may want to consider cutting bait or trailing it more tightly into (and beyond) earnings tomorrow.

Hope this makes sense.

Stay safe out there!

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