The Microsoft (NASDAQ:MSFT) stock price has surged about 34% year-to-date. At the same time, it has managed to consistently beat analyst expectations for the past eight quarters. And since the last earnings report, Microsoft has seen its shares rise to a new all-time high of $294.82. But can the stock continue to climb higher? And is now the time to add this business to my portfolio? Let’s take a look.
Will Azure and LinkedIn drive the Microsoft stock price higher?
Looking at the latest set of results, the company did not disappoint. Revenues came in 21% higher than a year ago at $46.2bn. Meanwhile, operating income surged by 42%, reaching $19.1bn.
Taking a closer look, it seems that its cloud computing division, yet again, continues to deliver growth. Revenue from this segment grew by 30% compared to the 25% and 9% growth of its Productivity and Personal computing segments, respectively.
Most of the growth from cloud computing originates directly from its Azure web services. While Microsoft does report the exact figures generated by this service, it has undoubtedly become the primary driver behind its success in recent years. Assuming this doesn’t change, Microsoft’s stock price may continue rising in line with Azure’s adoption by more businesses.
Something else that caught my eye was the performance of LinkedIn. Microsoft acquired the professional social media platform in 2016. And it has since grown to be used by over 645 million people. LinkedIn offers various talent acquisition solutions for companies seeking to hire new staff. But beyond this core product offering, it has evolved into an efficient platform for advertisers, opening up another recurring revenue stream. In my experience, that’s an excellent sign. And therefore, just like Azure, LinkedIn could be another catalyst that could drive the Microsoft stock price even higher over the long term.
The challenges that lie ahead
As promising as the firm’s performance has been, it’s far from perfect. One rising problem is the loss of market share within the personal computing space. In 2013, the Windows operating system held a 90% market share. Today, that number is closer to 73% as competition from macOS and Linux continues to ramp up. The launch of Windows 11 may be able to recapture some of this lost market share. But if Microsoft is unable to hold onto its ground, the stock price will likely suffer.
The firm is hardly free of competition in the cloud computing space either. While Azure may be steaming ahead, it’s having to face off against the likes of Google and Amazon. With a wide choice of similar services, Microsoft doesn’t control much pricing power. So, if a rival service can offer a higher quality experience for customers at the same price, the firm may begin to lose market share in this space as well.
Conclusion
Microsoft and its stock price have achieved stellar performance this year despite the challenges it continues to face. At least, that’s what I think. All things considered, I believe the company is more than capable of delivering long term growth. And therefore, I am considering adding this business to my portfolio today.
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Prosper Ambaka does not own shares in any of the companies mentioned. The Money Cog has no position in any of the companies mentioned. Views expressed on the companies and assets mentioned in this article are those of the writer and therefore may differ from the opinions of analysts in The Money Cog Premium services.
