Why I Believe Microsoft Could Easily Double Its Market Value

With a market capitalization of about $3 trillion, Microsoft (NASDAQ:MSFT) stands as the largest publicly traded company globally and one of the most successful software companies of all time. Despite various challenges over the years, its overall trajectory has been marked by consistent and robust fundamental growth. Microsoft is financially healthy, generating significant cash flow annually, and there is no sign that this trend will reverse anytime soon. While it deserves to trade at a premium, I believe it still represents a solid long-term investment. This belief is grounded in the company’s recent performance and the strength of its key segments.

Recent financial data further strengthens the bullish outlook. For the third quarter of the 2024 fiscal year, Microsoft reported revenue of $61.86 billion, a 17% increase from the previous year. Net income rose from $18.30 billion to $21.94 billion, operating cash flow surged from $24.44 billion to $31.92 billion, and EBITDA increased from $25.90 billion to $33.61 billion. These impressive results are part of a broader trend of sustained growth.

Microsoft’s Intelligent Cloud segment, which includes Azure, has been a major growth driver, with quarterly revenue rising 21% year-over-year to $26.71 billion. Azure alone saw a 31% increase in revenue due to higher demand for consumption-based services. The Productivity and Business Processes segment also grew by 11.7%, driven by Office products and LinkedIn. Even the More Personal Computing segment, encompassing Windows and gaming technologies, grew by 17.5%.

Profitability has also improved. The Intelligent Cloud segment’s profit rose by 32%, with a gross margin increase of $3.1 billion and a profit margin jump from 42.9% to 46.9%. The Productivity and Business Processes segment’s margin grew from 49.3% to 51.8%. Although the More Personal Computing segment saw a slight margin decline, overall margins are expanding.

For the final quarter of the 2024 fiscal year, Microsoft expects revenue to reach $64 billion, with net income around $23 billion. This would bring the annual net income to approximately $89 billion, up from $72 billion the previous year. Adjusted operating cash flow could reach $120 billion and EBITDA $135 billion.

Given Microsoft's consistent growth, robust financial health, and market-leading positions in key segments like cloud computing, the company is well-positioned for long-term success. Its ability to generate cash, repurchase shares, and pay dividends, while maintaining a strong balance sheet, underscores its potential to double its market value if the momentum hold on for longer. Thus, despite short-term market fluctuations, Microsoft remains for me a compelling buy for long-term investors.