Where Will Microsoft (MSFT) Stock Be in 5 Years?
If you’re looking for a stock to double within a year, then Microsoft (NASDAQ:MSFT) stock isn’t the right choice. However, the shares are likely to be twice their current price five years from now. Believe it or not, Microsoft’s cloud business could be the company’s main growth driver, even though that’s the segment that disappointed investors recently.
It’s interesting to consider the changes in Microsoft over the years. In the 1990s, Microsoft’s golden goose was its PC operating system, Windows. Today, Microsoft is better known for its cloud computing product/service suite, Azure.
That’s not a bad thing, but Microsoft still has to deal with weak PC demand, flagging ad revenue and a strong U.S. dollar. So, can a cloud-centered Microsoft overcome its current challenges and deliver outstanding value over the coming years?
A Precipitous Drop in MSFT Stock
To that last question, financial traders unequivocally said, “No!” as Microsoft released its results for fiscal 2023’s first quarter. On a year-over-year (YOY) basis, Windows OEM and Xbox content and services revenue decreased. Yet, all eyes were on Microsoft’s cloud business — and investors apparently didn’t like what they saw.
MSFT stock tumbled nearly 6% post-earnings, making Microsoft another victim of this earnings season’s Big Tech wreck. Then came the price target reductions. JPMorgan lowered its Microsoft price target from $305 to $275, while Wolfe Research cut its target on the shares from $340 to $280.
Wolfe Research analyst Alex Zukin added a bit of fearmongering into the mix, writing, “Winter is here, it’s coming for everyone and no software vendor will be left unscathed.” One headline after another focused on Microsoft’s apparently troubled cloud business. Is the tech giant’s cloud outlook really so cloudy, though?
Winter Is Upon Us, But It Will Pass
Sure, times are tough for Big Tech, but if any company can weather the winter storm, it’s Microsoft. Zukin, despite his scary comment, still sees Microsoft as a “brick house in a growing macro storm.”
If you’re taking a five-year view, then there’s no need to over-focus on current macro-level challenges. Inflation won’t stay elevated forever, and supply-chain issues will eventually pass.
And, Microsoft’s Q1 FY2023 cloud business actually fared better than the headlines would lead you to believe. Overall, the company’s cloud revenue totaled $25.7 billion, up 24% YOY. Perhaps the public expected more — but perhaps they shouldn’t.
If Microsoft’s cloud revenue growth maintains that pace, consider the positive impact this would have on the company’s market capitalization. So, why not look ahead and think about how much MSFT stock could gain from its current price?
Stay the Course With MSFT Stock
If you only read the fearmongering headlines, you might end up selling your Microsoft shares while the price is down. That would be unfortunate, as the company’s cloud business is growing its revenue.
So, instead of giving into the fear, consider Microsoft a “brick house in a growing macro storm.” There’s no reason why MSFT stock shouldn’t double to $450 or even reach $500 in five years. With a “this, too, shall pass” outlook, you can stay the course and take advantage of the “steady Eddie” profit potential that a stake in Microsoft provides.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
