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2021-12-28

Microsoft Stock Forecast: What To Watch For In 2022

Summary Microsoft had an excellent 2021, but that will not repeat in 2022. Still, analysts predict

Microsoft Stock Forecast: What To Watch For In 2022

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{"i18n":{"language":"zh_CN"},"data":{"magic":2,"id":696296931,"tweetId":"696296931","gmtCreate":1640698661878,"gmtModify":1640698661878,"author":{"id":4096548925879390,"authorId":4096548925879390,"authorIdStr":"4096548925879390","name":"BlueDahlia","avatar":"https://static.tigerbbs.com/ed3f75e316797b2df4e3a5991dea3f3b","vip":1,"userType":1,"introduction":"","boolIsFan":false,"boolIsHead":false,"crmLevel":2,"crmLevelSwitch":0,"individualDisplayBadges":[],"starInvestorFlag":false},"themes":[],"images":[],"coverImages":[],"extraTitle":"","html":"<html><head></head><body>Ok</body></html>","htmlText":"<html><head></head><body>Ok</body></html>","text":"Ok","highlighted":1,"essential":1,"paper":1,"likeSize":5,"commentSize":1,"repostSize":0,"favoriteSize":0,"link":"https://laohu8.com/post/696296931","repostId":1181019415,"repostType":4,"repost":{"id":"1181019415","pubTimestamp":1640697354,"share":"https://www.laohu8.com/m/news/1181019415?lang=&edition=full","pubTime":"2021-12-28 21:15","market":"us","language":"en","title":"Microsoft Stock Forecast: What To Watch For In 2022","url":"https://stock-news.laohu8.com/highlight/detail?id=1181019415","media":"Seeking Alpha","summary":"Summary\n\nMicrosoft had an excellent 2021, but that will not repeat in 2022.\nStill, analysts predict ","content":"Summary\n<ul>\n <li>Microsoft had an excellent 2021, but that will not repeat in 2022.</li>\n <li>Still, analysts predict that MSFT will deliver double-digit returns next year. I am a little more conservative due to MSFT's high valuation.</li>\n <li>Microsoft Corporation is an excellent long-term investment, but waiting for a better entry point could pay off, as shares are historically expensive today.</li>\n</ul>\n<img src=\"https://static.tigerbbs.com/78cf4b56323a37eacd27b73ced593338\" tg-width=\"1536\" tg-height=\"1082\" width=\"100%\" height=\"auto\">Jean-Luc Ichard/iStock Editorial via Getty Images\nArticle Thesis\nMicrosoft Corporation (MSFT) is one of the most dominant tech companies in the world, and as part of the&nbsp;GAMMA&nbsp;group, it has performed very well in 2021. That was partially driven by underlying business growth, but multiple expansion also played a role. Microsoft is trading at a relatively high valuation - due to its quality and solid growth opportunities, a premium valuation seems justified, but with interest rate increases looming, MSFT could still experience multiple contraction headwinds over the coming years.\nMicrosoft Valuation\nMicrosoft Corporation is a leading tech company with a huge moat across its core businesses and with attractive growth opportunities in areas such as cloud computing and the emerging Metaverse. On top of that, Microsoft has excellent fundamentals, which include huge returns on capital, high margins, and a fortress balance sheet - one of only two in the world that are AAA-rated. It is thus not too surprising to see Microsoft trade at an above-average valuation, but MSFT currently also trades at a considerable premium relative to how shares of the company were valued in the past.\n<img src=\"https://static.tigerbbs.com/212ee5adb6f1e19137d2c30aa0a446d5\" tg-width=\"635\" tg-height=\"450\" width=\"100%\" height=\"auto\">Data by YCharts\nAt current prices of around $335, Microsoft Corporation is valued at a little more than 36x forward earnings, which equates to an earnings yield of slightly less than 3%. This represents a ~15% premium compared to the 5-year median earnings multiple, and a pretty hefty 33% premium relative to the 10-year median earnings multiple.\nTo some degree, one can argue that the rise in Microsoft's earnings multiple over the last decade was justified, as the company successfully managed to turn into a cloud- and mobile-centric company - which was not guaranteed a decade ago. Nevertheless, when a company's shares are valued at a hefty premium compared to the longer-term average, investors should consider the downside risk from multiple compression potential.\nLooking at Microsoft's valuation on an enterprise value to EBITDA basis, which accounts for changes in debt usage over time, MSFT seems pricey as well:\n<img src=\"https://static.tigerbbs.com/c58a0bd4255e3439c13c1a2f68d9e782\" tg-width=\"635\" tg-height=\"433\" width=\"100%\" height=\"auto\">Data by YCharts\nAt 25x forward EBITDA, Microsoft Corporation is trading at a relatively high valuation in absolute terms, and also at a quite large ~100% premium relative to the 10-year median EBITDA multiple of 12.7. Microsoft's net cash position, as a percentage of its market capitalization, has declined over the last couple of years, which resulted in a growing enterprise value (where net cash is subtracted), which explains some of the EV/EBITDA multiple expansion seen in the recent past. Still, Microsoft has clearly seen its valuation expand by a lot over the last couple of years. For those that bought into MSFT early on, that was great, as they saw their shares surge due to multiple expansion tailwinds. For someone thinking about investing new money today, the multiple expansion that we have seen in the last couple of year's isn't great, however, since putting new money into shares at historically high valuations could result in below-average returns due to headwinds from multiple compression, when the valuation normalizes towards the historic range.\nIs Microsoft Stock Expected To Rise?\nIn the long run, Microsoft will, I believe, almost certainly experience share price gains. The company will deliver business growth for many years, which should result in rising profits, and as MSFT is buying back shares regularly, those profits are distributed over a shrinking number of shares, leading to additional earnings per share growth tailwinds. With EPS rising, possibly for decades, MSFT's shares will also rise in the long run - although not at the rate seen in the last couple of years. In the near term, share price gains are less certain - earnings per share will most likely be higher next year compared to the current year, but due to the high valuation MSFT trades at right now, earnings per share gains could be offset by multiple contraction. This multiple contraction is not a certainty, of course, but could occur if interest rates rise faster/earlier than expected, or if the broad market experiences a correction, etc.\nWhat Is Microsoft Stock's Prediction For 2022?\nLet's first take a look at what Wall Street thinks about this question:\n<img src=\"https://static.tigerbbs.com/872df9c2e4729887768acc7be770d03c\" tg-width=\"635\" tg-height=\"467\" width=\"100%\" height=\"auto\">Data by YCharts\nAs one can see in the above chart, analysts believe that Microsoft will experience attractive share price gains in 2022. The current consensus price target stands at $371, which implies an upside of around 10% from the current level over the next twelve months, as that is the usual time frame for Wall Street price targets. Price gains of 10%, with a dividend yield of 0.7% on top of that, would be a pretty attractive return, although that still pales in comparison to the returns MSFT generated over the last couple of years - shares are up 51% over the last twelve months and rose by a massive 430% over the last five years. It is, I believe, almost certain that returns like that will not be possible going forward - the law of large numbers dictates that adding 10%, 20%, or more per year to a company's market cap becomes increasingly hard as a company grows in size. Quintupling MSFT's market cap from $500 billion to $2.5 trillion over the last five years was quite a feat already, but quintupling it again - which would require adding$10 trillionin market cap - seems extremely unlikely, at least for the foreseeable future.\nIf analysts are correct, MSFT will thus deliver very solid returns in 2022, but those won't be comparable to what we have seen in previous years. For those that believe that MSFT will continue to compound at the rate seen in the recent past, 2022 could thus be a major disappointment. Analysts tend to be somewhat optimistic with their price targets, thus it is also possible that MSFT will deliver total returns that are weaker compared to what analysts are predicting. Current estimates see MSFT earning $10.50 next fiscal year (which ends in June 2023 and starts in July 2022) - if MSFT were to trade at 33x that number a year from now, which would still not be a low valuation at all, its shares would essentially trade in-line with where they trade today.\nI am thus more conservative than the analyst consensus and believe that MSFT could deliver returns of less than 10% in 2022. Depending on overall market conditions, even a share price decline is possible - not due to MSFT being a bad company, but due to it being a great company trading at a valuation that is well above historical levels.\nIs MSFT Stock A Buy, Sell, Or Hold?\nMicrosoft is one of the best investments in the world, I believe, when we back out valuation for a second. The company has an excellent moat across its cash cows MS Office, and its operating system business, and is one of the leaders in the fast-growing cloud computing business with its Azure division. Microsoft also has strong leadership, sports excellent fundamentals and the company is one of only two companies in the world with a AAA rating. Strong cash flows allow Microsoft to return many billions of dollars every year to the company's owners via buybacks and dividends. Last but not least, Microsoft benefits from strong industry tailwinds, as the world is growing ever more interconnected and digitalized, which provides for solid growth tailwinds across Microsoft's many different business units, including cloud computing, Office, and even in areas such as Gaming.\nMicrosoft's valuation is, however, pretty high, and that should not be neglected. In the long run, earnings growth will likely result in ample share price upside, but that does not mean that shares will necessarily trade higher a month or a year from now. In 2022, we will likely see several Fed rate hikes, and those could put pressure on expensive growth stocks such as Microsoft - with a large portion of all future profits lying in the future, they will feel a more pronounced impact from a rising discount rate compared to value stocks where a higher portion of all future profits will be generated in the near term. Potential headwinds from higher rates will not necessarily result in a declining share price, however. Sentiment and psychology play a huge role as well, and an increasing focus on the Metaverse could help MSFT's share price. Microsoft is seen as one of the most likely winners in the future Metaverse by many investors, particularly in the \"work Metaverse\", where MSFT seeks to become successful on both the software side and the hardware side - with products&nbsp;such as the HoloLens 2. If this narrative holds, and if enthusiasm around the Metaverse remains high or continues to grow, Microsoft could see its shares perform well despite an above-average valuation.\nAll in all, there are both opportunities and threats for MSFT's shares in 2022. The company will do well on an operating basis, as it has for many years. Shares will, according to the analyst community, deliver total returns of about 10% next year. I am a little more conservative and think that there is a good chance that returns will be in the single digits due to multiple contraction headwinds. For someone interested in holding MSFT for many years - and the company seems like a great choice for such an investment - the performance in 2022 won't matter too much, however, and MSFT is positioned to perform well on an operational basis for many years, with exposure to many growth markets such as cloud computing, gaming, and the Metaverse (I see MSFT as a much better Metaverse play than NVIDIA (NVDA), trading at almost 70x net profits).","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Microsoft Stock Forecast: What To Watch For In 2022</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nMicrosoft Stock Forecast: What To Watch For In 2022\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-12-28 21:15 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4476985-microsoft-stock-forecast-what-to-watch-for-in-2022>Seeking Alpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nSummary\n\nMicrosoft had an excellent 2021, but that will not repeat in 2022.\nStill, analysts predict that MSFT will deliver double-digit returns next year. I am a little more conservative due to MSFT's...\n\n<a href=\"https://seekingalpha.com/article/4476985-microsoft-stock-forecast-what-to-watch-for-in-2022\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"MSFT":"微软"},"source_url":"https://seekingalpha.com/article/4476985-microsoft-stock-forecast-what-to-watch-for-in-2022","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1181019415","content_text":"Summary\n\nMicrosoft had an excellent 2021, but that will not repeat in 2022.\nStill, analysts predict that MSFT will deliver double-digit returns next year. I am a little more conservative due to MSFT's high valuation.\nMicrosoft Corporation is an excellent long-term investment, but waiting for a better entry point could pay off, as shares are historically expensive today.\n\nJean-Luc Ichard/iStock Editorial via Getty Images\nArticle Thesis\nMicrosoft Corporation (MSFT) is one of the most dominant tech companies in the world, and as part of the GAMMA group, it has performed very well in 2021. That was partially driven by underlying business growth, but multiple expansion also played a role. Microsoft is trading at a relatively high valuation - due to its quality and solid growth opportunities, a premium valuation seems justified, but with interest rate increases looming, MSFT could still experience multiple contraction headwinds over the coming years.\nMicrosoft Valuation\nMicrosoft Corporation is a leading tech company with a huge moat across its core businesses and with attractive growth opportunities in areas such as cloud computing and the emerging Metaverse. On top of that, Microsoft has excellent fundamentals, which include huge returns on capital, high margins, and a fortress balance sheet - one of only two in the world that are AAA-rated. It is thus not too surprising to see Microsoft trade at an above-average valuation, but MSFT currently also trades at a considerable premium relative to how shares of the company were valued in the past.\nData by YCharts\nAt current prices of around $335, Microsoft Corporation is valued at a little more than 36x forward earnings, which equates to an earnings yield of slightly less than 3%. This represents a ~15% premium compared to the 5-year median earnings multiple, and a pretty hefty 33% premium relative to the 10-year median earnings multiple.\nTo some degree, one can argue that the rise in Microsoft's earnings multiple over the last decade was justified, as the company successfully managed to turn into a cloud- and mobile-centric company - which was not guaranteed a decade ago. Nevertheless, when a company's shares are valued at a hefty premium compared to the longer-term average, investors should consider the downside risk from multiple compression potential.\nLooking at Microsoft's valuation on an enterprise value to EBITDA basis, which accounts for changes in debt usage over time, MSFT seems pricey as well:\nData by YCharts\nAt 25x forward EBITDA, Microsoft Corporation is trading at a relatively high valuation in absolute terms, and also at a quite large ~100% premium relative to the 10-year median EBITDA multiple of 12.7. Microsoft's net cash position, as a percentage of its market capitalization, has declined over the last couple of years, which resulted in a growing enterprise value (where net cash is subtracted), which explains some of the EV/EBITDA multiple expansion seen in the recent past. Still, Microsoft has clearly seen its valuation expand by a lot over the last couple of years. For those that bought into MSFT early on, that was great, as they saw their shares surge due to multiple expansion tailwinds. For someone thinking about investing new money today, the multiple expansion that we have seen in the last couple of year's isn't great, however, since putting new money into shares at historically high valuations could result in below-average returns due to headwinds from multiple compression, when the valuation normalizes towards the historic range.\nIs Microsoft Stock Expected To Rise?\nIn the long run, Microsoft will, I believe, almost certainly experience share price gains. The company will deliver business growth for many years, which should result in rising profits, and as MSFT is buying back shares regularly, those profits are distributed over a shrinking number of shares, leading to additional earnings per share growth tailwinds. With EPS rising, possibly for decades, MSFT's shares will also rise in the long run - although not at the rate seen in the last couple of years. In the near term, share price gains are less certain - earnings per share will most likely be higher next year compared to the current year, but due to the high valuation MSFT trades at right now, earnings per share gains could be offset by multiple contraction. This multiple contraction is not a certainty, of course, but could occur if interest rates rise faster/earlier than expected, or if the broad market experiences a correction, etc.\nWhat Is Microsoft Stock's Prediction For 2022?\nLet's first take a look at what Wall Street thinks about this question:\nData by YCharts\nAs one can see in the above chart, analysts believe that Microsoft will experience attractive share price gains in 2022. The current consensus price target stands at $371, which implies an upside of around 10% from the current level over the next twelve months, as that is the usual time frame for Wall Street price targets. Price gains of 10%, with a dividend yield of 0.7% on top of that, would be a pretty attractive return, although that still pales in comparison to the returns MSFT generated over the last couple of years - shares are up 51% over the last twelve months and rose by a massive 430% over the last five years. It is, I believe, almost certain that returns like that will not be possible going forward - the law of large numbers dictates that adding 10%, 20%, or more per year to a company's market cap becomes increasingly hard as a company grows in size. Quintupling MSFT's market cap from $500 billion to $2.5 trillion over the last five years was quite a feat already, but quintupling it again - which would require adding$10 trillionin market cap - seems extremely unlikely, at least for the foreseeable future.\nIf analysts are correct, MSFT will thus deliver very solid returns in 2022, but those won't be comparable to what we have seen in previous years. For those that believe that MSFT will continue to compound at the rate seen in the recent past, 2022 could thus be a major disappointment. Analysts tend to be somewhat optimistic with their price targets, thus it is also possible that MSFT will deliver total returns that are weaker compared to what analysts are predicting. Current estimates see MSFT earning $10.50 next fiscal year (which ends in June 2023 and starts in July 2022) - if MSFT were to trade at 33x that number a year from now, which would still not be a low valuation at all, its shares would essentially trade in-line with where they trade today.\nI am thus more conservative than the analyst consensus and believe that MSFT could deliver returns of less than 10% in 2022. Depending on overall market conditions, even a share price decline is possible - not due to MSFT being a bad company, but due to it being a great company trading at a valuation that is well above historical levels.\nIs MSFT Stock A Buy, Sell, Or Hold?\nMicrosoft is one of the best investments in the world, I believe, when we back out valuation for a second. The company has an excellent moat across its cash cows MS Office, and its operating system business, and is one of the leaders in the fast-growing cloud computing business with its Azure division. Microsoft also has strong leadership, sports excellent fundamentals and the company is one of only two companies in the world with a AAA rating. Strong cash flows allow Microsoft to return many billions of dollars every year to the company's owners via buybacks and dividends. Last but not least, Microsoft benefits from strong industry tailwinds, as the world is growing ever more interconnected and digitalized, which provides for solid growth tailwinds across Microsoft's many different business units, including cloud computing, Office, and even in areas such as Gaming.\nMicrosoft's valuation is, however, pretty high, and that should not be neglected. In the long run, earnings growth will likely result in ample share price upside, but that does not mean that shares will necessarily trade higher a month or a year from now. In 2022, we will likely see several Fed rate hikes, and those could put pressure on expensive growth stocks such as Microsoft - with a large portion of all future profits lying in the future, they will feel a more pronounced impact from a rising discount rate compared to value stocks where a higher portion of all future profits will be generated in the near term. Potential headwinds from higher rates will not necessarily result in a declining share price, however. Sentiment and psychology play a huge role as well, and an increasing focus on the Metaverse could help MSFT's share price. Microsoft is seen as one of the most likely winners in the future Metaverse by many investors, particularly in the \"work Metaverse\", where MSFT seeks to become successful on both the software side and the hardware side - with products such as the HoloLens 2. If this narrative holds, and if enthusiasm around the Metaverse remains high or continues to grow, Microsoft could see its shares perform well despite an above-average valuation.\nAll in all, there are both opportunities and threats for MSFT's shares in 2022. The company will do well on an operating basis, as it has for many years. Shares will, according to the analyst community, deliver total returns of about 10% next year. I am a little more conservative and think that there is a good chance that returns will be in the single digits due to multiple contraction headwinds. For someone interested in holding MSFT for many years - and the company seems like a great choice for such an investment - the performance in 2022 won't matter too much, however, and MSFT is positioned to perform well on an operational basis for many years, with exposure to many growth markets such as cloud computing, gaming, and the Metaverse (I see MSFT as a much better Metaverse play than NVIDIA (NVDA), trading at almost 70x net profits).","news_type":1},"isVote":1,"tweetType":1,"viewCount":712,"commentLimit":10,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"symbols":[],"verified":2,"subType":0,"readableState":1,"langContent":"CN","currentLanguage":"CN","warmUpFlag":false,"orderFlag":false,"shareable":true,"causeOfNotShareable":"","featuresForAnalytics":[],"commentAndTweetFlag":false,"upFlag":false,"length":2,"xxTargetLangEnum":"ZH_CN"},"commentList":[],"hasMoreComment":false,"orderType":2}

Microsoft Stock Forecast: What To Watch For In 2022

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