Is Microsoft a good long term stock?
One analyst revised their earnings estimate upwards in the last 60 days for fiscal 2024. The Zacks Consensus Estimate has increased $0.01 to $11.14.
Microsoft's growth is accelerating thanks to the company's initiative of integrating AI across multiple products. An acceleration in Microsoft's growth, multibillion-dollar revenue opportunities, and the company's valuation indicate that its stock market rally is sustainable.
A look back at the companies' financial performance and a look ahead at expected revenue and profits make the case that Apple is no longer a growth stock and that Microsoft is the better long-term investment.
From fiscal 2023 to fiscal 2026, analysts expect Microsoft's revenue to grow at a compound annual growth rate (CAGR) of 15% as its EPS rises at a CAGR of 17%. We should take those estimates with a grain of salt, but Microsoft's disciplined expansion over the past decade suggests it can hit those targets.
Dubbed the Magnificent Seven stocks, Apple, Microsoft, Google parent Alphabet, Amazon, Nvidia, Meta Platforms and Tesla lived up to their name in 2023 with big gains.
The bottom line on Microsoft stock
Have a look at the above chart and you'll see that if you put a grand into MSFT stock two decades ago, today it would be worth more than $24,000. The same amount invested in the S&P 500 20 years ago would theoretically be worth almost $6,500 today.
According to our calculations, a $1000 investment made in November 2013 would be worth $9,741.59, or a gain of 874.16%, as of November 2, 2023, and this return excludes dividends but includes price increases. The S&P 500 rose 140.56% and the price of gold increased 44.55% over the same time frame in comparison.
Growth & Recent Performance
Microsoft's stock is still up +54% over the last year and anticipation of double-digit EPS and sales growth in FY25 as well should keep investors engaged.
Analysts are generally optimistic about Microsoft's business and stock price in 2024. The analysts covering Microsoft are projecting full-year adjusted earnings per share of $11.24 in fiscal 2024. That's up from an earnings per share of $9.81 in fiscal 2023.
MSFT boasts an average earnings surprise of 7.8%. Additionally, Microsoft's earnings are expected to grow 13.6% for the current fiscal year. Since stock prices respond to earnings estimate revisions, it can be very profitable to buy stocks with an increased earnings outlook.
Is Microsoft a strong buy now?
Based on analyst ratings, Microsoft's 12-month average price target is $470.02. Microsoft has 13.12% upside potential, based on the analysts' average price target. Microsoft has a conensus rating of Strong Buy which is based on 32 buy ratings, 1 hold ratings and 1 sell ratings.
In 2024, Microsoft will "deliver on the hype" and start monetizing its AI investments, Jefferies analyst Brent Thill said in a client note Friday. He lists Microsoft stock as a "top pick" with a buy rating and price target of 450. On the stock market today, Microsoft stock dipped a fraction to close at 367.75.
Given the multiple ways Microsoft can profit from the AI revolution and other catalysts that could fuel its growth, I'd argue it's not too late to buy Microsoft.
Now, let's consider how our calculations change if the time horizon is 10 years. If you are starting from scratch, you will need to invest about $4,757 at the end of every month for 10 years. Suppose you already have $100,000. Then you will only need $3,390 at the end of every month to become a millionaire in 10 years.
A $10,000 Investment in Microsoft in 1986 is Worth $39 Million Today!
Achieving this milestone isn't a walk in the park by any means, but it can be more accomplishable than many realize, thanks to the power of investing and compound interest. A $10,000 investment in Microsoft 30 years ago, at the start of January 1994, would be worth nearly $2.4 million today with dividends reinvested.
On 13 March 1986, Microsoft went public at $21 a share. 100 shares would be worth $2100. Microsoft has since had 9 splits (Microsoft Stock Split History ) for a total of 288x. Split adjusted IPO price would be 21/288 = $0.073.
Multiplying $633 billion by 10 gives us a potential market cap of $6.33 trillion. Given that Microsoft's market cap today is $3.0 trillion, a market cap of $6.33 trillion translates to a share price of $852. This share price forecast suggests that Microsoft stock could be a solid investment over the next decade.
Stock Price Forecast
The 40 analysts with 12-month price forecasts for Microsoft stock have an average target of 416, with a low estimate of 305 and a high estimate of 600. The average target predicts an increase of 2.03% from the current stock price of 407.72.
Microsoft stock price stood at $415.50
According to the latest long-term forecast, Microsoft price will hit $450 by the middle of 2024 and then $600 by the end of 2025. Microsoft will rise to $700 within the year of 2026, $800 in 2027, $900 in 2028, $1000 in 2029, $1100 in 2030, $1200 in 2032 and $1300 in 2034.
What will Microsoft stock be worth in 2025?
According to our Microsoft stock prediction for 2025, MSFT stock will be priced at $ 520.79 in 2025. This forecast is based on the stock's average growth over the past 10 years.
Now, in 2023's second half, that resistance has greatly diminished. Besides, Microsoft will undoubtedly continue to make waves with its leading-edge, AI-friendly product lines. Therefore, MSFT stock is likely on a path to $400 or more, and it earns a confident “B” rating.
Microsoft hasn't indicated any plans for a stock split, but given its robust growth, this may be the year it joins its tech peers in splitting its high-priced shares.
Microsoft Could Be Worth Over $500 Per Share Based on Its Massive Free Cash Flow. Microsoft Corp (MSFT) stock is still undervalued based on its free cash flow upside in the next year. MSFT stock could be worth 39% more or $518 per share based on $96 billion in FCF estimates next year.
Consider the case of Microsoft (MSFT -0.33%) over the last five years. A simple $10,000 investment made five years ago would have grown to more than $32,600 today. That's a compound annual growth rate (CAGR) of 26.7% -- far better than the S&P 500's 11.2% CAGR over the same period.
