For many investors, the end of 2022 can’t come soon enough. Every major market index has suffered its most painful sell-off in over a decade, however NASDAQ Composite was by far the hardest hit. Even 14 months after its peak, the index is still down nearly 33% from its high in late 2021.
The ongoing uncertainty has many investors looking for cover, but those who’ve been around the area a few times know that’s just part of the cost of admission. The stock market remains the best way to generate game-changing wealth over time—at least for investors who can keep their wits about them. In the end, every previous bear market gave way to bull marketThese occasional market crashes give investors the opportunity to buy top-tier companies with proven track records at historically low prices.
One compelling bear market opportunity is Microsoft (MSFT 0.30%). Like many tech companies, macro uncertainty has punished stocks. However, those who step back and look at the big picture will realize that this is one stock that stock investors should buy like there is no tomorrow.
The past 12 months have not been pleasant for Microsoft shareholders. Even with a file tech giant It delivered record results, and its stock fell 25%, driven by macroeconomic strength driving the broader market.
However, a look at the results shows that the company continues to execute at a high level. For fiscal year 2022 (which ended June 30), Microsoft delivered record results, highlighted by revenue of $198.3 billion which was up 18% year over year and operating income of $83 billion, up 19%. Microsoft helped fuel the results Cloud computing which exceeded $100 billion in annual revenue for the first time.
To be clear, Microsoft faced several headwinds that affected its growth. Exchange rates slashed revenue by about $595 million, while production shutdowns in China and a declining PC market cost another $300 million. The decrease in advertising spending also resulted in losses of $100 million.
But even as the market downturn worsened, Microsoft continued to generate respectable growth. In the first quarter of fiscal 2023 (ending Sept. 30), revenue was up 11% year-over-year, but that only tells part of the story. Were it not for the impact of the strong dollar on foreign exchange rates, revenues would have grown by 16% – slightly down from last year’s pace. This shows that it is the current economic slowdown – and not any problem with Microsoft – that is affecting its growth.
The impact of these macroeconomic conditions was also evident in the diversified performance of Microsoft’s largest business units. While the intelligent cloud segment grew 20% year-over-year, the personal computing segment declined slightly, while the productivity and business operations segment rose 9%.
This helps illustrate an important point about Microsoft: Its strength lies in the diversity of its business, which runs the gamut from enterprise solutions to consumer products and everything in between. Even when one feels stressed, the other can pick up the slack.
Taken together, the evidence suggests that once the macroeconomic headwinds subside, Microsoft’s stock recovery should be swift and strong.
What will drive future growth?
Given its massive size, investors might be inclined to think that Microsoft’s growth is over, but that ignores several important growth drivers.
Much ink has been spilled on digital transformation. In its simplest terms, it is the process of replacing old processes and creating new, more efficient ones using digital technology. Cloud computing, the process of storing and accessing systems, data, and software in data centers and accessing them over the Internet, is one example – which offers a range of benefits to businesses.
There is no doubt that the continued adoption of cloud computing will benefit Microsoft Azure, the second largest provider of cloud infrastructure services globally, after Amazon Web Services (AWS). Azure is also growing faster than its larger competitor, with cloud computing revenue growing 35% year-over-year in the third quarter, outpacing AWS’s 27% growth, according to Canalys.
This isn’t Microsoft’s only opportunity for growth, and the recent moves help show that it has another win in the fire. company pursuit Activision Blizzard Not only will it give Microsoft more capital in the gaming market, but it will also boost cloud gaming aspirations.
Microsoft also stunned the tech world when reports of a 10 billion dollars to invest In OpenAI, it’s best known for DALL-E 2 and ChatGPT. This could take Microsoft’s artificial intelligence (AI) capabilities to the next level, with a host of ways to take advantage of next-generation technology.
Let’s talk about the price
With Microsoft’s leadership in the enterprise productivity market, strong position in its consumer-oriented business, and top 2 cloud computing operation, its valuation is at its lowest point in years. Microsoft stock is trading for 8 times next year’s sales — a very reasonable valuation — especially given its history of strong growth and continued prospects.
Plenty of evidence suggests that macroeconomic headwinds are driving Microsoft stock lower. The current climate will eventually give way to better times, and when that happens, investors will wish they could buy more Microsoft stock. while it was for sale.
John Mackey, former CEO of Whole Foods Market, an Amazon company, is on the board of directors of The Motley Fool’s. Danny Vena He has positions at Activision Blizzard, Amazon.com, and Microsoft. The Motley Fool has positions at and recommends Activision Blizzard, Amazon.com, and Microsoft. The Motley Fool has a file Disclosure policy.