This is a step-by-step stock review to answer the question, is Microsoft (MSFT) stock a good buy?
This article will teach you how to use the 4Ms of investing. This will be a detailed walkthrough to show you how the 4Ms work and why they are important. If you are interested, you can log into Tykr to use the 4M Confidence Booster (Powered by OpenAI) which will allow you to complete a 4M Analysis in less than 60 seconds.
What are the 4Ms?
- MOS (Margin of Safety) – The MOS is the math part of investing which includes the Summary, Score, and MOS (Margin of Safety).
- Meaning – The meaning is the business model and how scalable the revenue streams are.
- Moat – The moat is how the business compares to other companies in the same Sector and Industry.
- Management – The management is the track record of the CEO.
What 4M score are we going for?
- 80-100 = High confidence – Yay! You should have high confidence buying this stock. It passes all 4M!
- 60-79 = Moderate confidence – Alert! There may be better stocks in the market. Only buy this stock if you truly believe the company will improve!
- 0-59 = Low confidence – Warning! There are better stocks in the market. Due to the low score, you should consider looking at other stocks.
Table of Contents
The following links will direct you to key topics to help answer the question, is Microsoft (MSFT) stock a good buy?
- Microsoft Company History
- MOS (Margin of Safety)
- Meaning
- Moat
- Management
- 4M Score
- Is Microsoft (MSFT) stock a good buy
1. Microsoft Company History
When investing in stocks, it’s important to know the company’s history. This helps us understand the various revenue streams, if they acquired other companies, how they grew through difficult times, and how they separated themselves from the competition.
- Founded in 1975 by Bill Gates and Paul Allen, Microsoft has since become a tech behemoth.
- Microsoft’s groundbreaking MS-DOS operating system was released in 1980, laying the foundation for its future success.
- The launch of Windows 1.0 in 1985 revolutionized the computer operating system landscape.
- Going public in 1986 made Bill Gates a billionaire at just 31 years old and propelled Microsoft to even greater heights.
- Windows 95, 98, and XP solidified Microsoft’s dominance in the software market.
- Diversification efforts saw the introduction of the Office suite in 1989, a staple in business software to this day.
- In 2001, Microsoft entered the gaming industry with the launch of the iconic Xbox console.
- The acquisition of LinkedIn in 2016 expanded Microsoft’s reach into social networking and professional services.
- Embracing cloud computing, Microsoft introduced Azure in 2010, becoming a major player in this rapidly growing sector. Satya Nadella’s tenure as CEO saw
- Microsoft pivot towards cloud services and AI, driving innovation and growth.
- Today, Microsoft is one of the largest tech companies globally, with a market cap exceeding $2 trillion.
From its humble beginnings in a garage to its current status as a tech powerhouse, Microsoft’s journey is a testament to relentless innovation and adaptation.
2. MOS (Margin of Safety)
When investing in a company, the first step is to look at the financials. Fortunately, Tykr does this for us automatically. The higher the score, the stronger the financials and the safer the investment. The higher the MOS, the higher the potential returns you can make.
- Summary: Watch
- Score: 67
- MOS: 1%
To see the most up-to-date Summary, Score, and MOS, please log into Tykr.
3. Meaning
When investing in a company, it’s important to know how a company makes money. A mature business model has multiple streams of revenue which allow the company to weather downturns in the economy.
Here is how Microsoft (MSFT) makes money:
- Software sales: including Windows operating systems, Office suite, and server software
- Cloud services: Azure platform for businesses
- Gaming: Xbox consoles, games, subscriptions
- LinkedIn acquisition monetization
- Surface device sales
- Advertising on Bing and MSN
- Enterprise services, licensing, and patents
- Professional services like IT consulting
- App Store sales for Windows and Xbox platforms.
Here are a few of the other companies that Microsoft has acquired over the years. This is important because a company will use a “Buy before build” philosophy to go to market faster and add additional streams of revenue. A company with more revenue streams has a more stable business model. Keep in mind, that most companies don’t build new software because it takes too long to go to market and generate revenue.
- LinkedIn Corporation
- GitHub
- Mojang
- Skype Technologies
- Nokia’s Devices and Services Division
- Yammer
- ZeniMax Media
- aQuantive
- Danger Inc.
- Skype Technologies
4. Moat
When investing in a company, it’s important to understand how a company ranks against other companies in the same sector and industry. Based on the Score, here is how Microsoft stacks up against other companies.
- Amazon – 84
- Microsoft – 67
- Apple – 67
- Google – 67
- IBM – 61
To see the most up-to-date Summary, Score, and MOS on each stock, please log into Tykr.
5. Management
When investing in a company, it’s important to understand who the CEO is, what they have accomplished in the past, and how they have helped this company grow. Good leaders typically have stronger cultures, less turnover, and better returns in the stock market.
- Cloud computing transformation: Satya Nadella successfully shifted Microsoft’s focus towards cloud services, leading to the growth of Azure platform and establishing Microsoft as a major player in the cloud computing market.
- Increased market value: Under Nadella’s leadership, Microsoft’s market capitalization surpassed $2 trillion, making it one of the most valuable companies in the world.
- Embracing open-source: Nadella’s embrace of open-source technologies, such as integrating Linux into Windows and acquiring GitHub, helped Microsoft gain trust and collaboration within the developer community.
- Successful acquisitions: Nadella oversaw strategic acquisitions like LinkedIn, GitHub, and ZeniMax Media, expanding Microsoft’s portfolio and revenue streams.
- Cultural transformation: Nadella’s focus on empathy, collaboration, and innovation fostered a cultural shift within Microsoft, enabling greater teamwork and agility.
- AI and ML advancements: Nadella drove Microsoft’s advancements in artificial intelligence and machine learning, integrating these technologies into its products and services.
- Increased diversity and inclusion: Nadella prioritized diversity and inclusion efforts, with initiatives such as the Diversity and Inclusion report, aimed at fostering a more inclusive workplace environment.
- Expansion of Surface devices: Nadella oversaw the expansion of Microsoft’s Surface line of devices, offering innovative hardware solutions to complement its software and services.
- Sustainable initiatives: Nadella has led Microsoft’s commitment to sustainability, setting ambitious climate goals and investing in renewable energy projects.
6. 4M Score
All of our homework on this company leads up to the 4M Score. A lot of investors only look at the numbers. Yes, it’s important to look at the first M (MOS) which is the math part of investing but it’s also important to look past the numbers and also look at the Meaning, Moat, and Management. If all 4Ms pass, we should have high confidence in buying this stock.
What 4M score are we going for?
- 80-100 = High confidence – Yay! You should have high confidence buying this stock. It passes all 4M!
- 60-79 = Moderate confidence – Alert! There may be better stocks in the market. Only buy this stock if you truly believe the company will improve!
- 0-59 = Low confidence – Warning! There are better stocks in the market. Due to the low score, you should consider looking at other stocks.
👉 The 4M Score of Microsoft is 80/100.
To see the most up-to-date 4M Score, please log into Tykr.
7. Is Microsoft (MSFT) stock a good buy?
Some of the top questions investors can have is Microsoft (MSFT) stock a good buy or should I buy Microsoft (MSFT) stock?
Microsoft is a powerhouse in the tech industry, known for its innovation, diverse product portfolio, and strong financial performance. Here are some reasons why Microsoft may be a good investment:
- Cloud computing dominance: Microsoft’s Azure platform has experienced rapid growth, positioning the company as a top contender in the cloud services market, which is expected to continue expanding.
- Diversified revenue streams: Microsoft’s revenue comes from various sources, including software sales, cloud services, gaming, and professional services, providing stability and resilience against market fluctuations.
- Strong financials: Microsoft boasts strong financial performance, with consistently increasing revenue, profitability, and a solid balance sheet, making it an attractive investment option.
- Leadership: CEO Satya Nadella has led Microsoft through a successful transformation, focusing on innovation, cloud services, and increasing market value, which has resonated well with investors.
On the other hand, some factors to consider regarding investing in Microsoft are:
- Valuation concerns: Microsoft’s stock price may be considered high, potentially impacting its valuation and posing a risk for those seeking undervalued investments.
- Competition: The tech industry is highly competitive, with rivals constantly innovating and challenging Microsoft’s market share in various segments, which could impact long-term growth.
- Regulatory risks: Like other tech giants, Microsoft faces regulatory scrutiny over antitrust and privacy concerns, which could lead to legal challenges and financial repercussions.
To truly know if Microsoft is a good stock to buy or sell, we recommend you log into Tykr. Within seconds you can see the Summary, Score, MOS, and 4M Score.
If you found this stock review interesting, you may also like this review on Netflix.