Microsoft Stock Outperformed The Expectations In Q4

MSFT: Microsoft logo

Microsoft’s stock (NASDAQ: MSFT) has gained approximately 40% YTD as compared to the 19% rise in the S&P500 index over the same period. Further, at its current price of $336 per share, it is trading 3% below its fair value of $345 – Trefis’ estimate for Microsoft’s valuationThe technology giant surpassed the consensus estimates in the fourth quarter of FY2023 (FY July-June). It reported an 8% y-o-y increase in total revenues to $56.2 billion, driven by a 10% growth in the productivity & business processes segment and a 15% rise in the intelligent cloud unit. However, the top line was somewhat offset by a 4% drop in the more personal computing division. It was primarily due to a 12% decrease in the Windows OEM and a 20% decline in the devices revenues. On the cost front, the operating expenses as a % of revenues witnessed a favorable drop in the quarter, thanks to lower sales & marketing and research & development costs. Overall, this led to a 20% y-o-y improvement in the net income to $20.1 billion. 

The company’s top line grew 7% y-o-y to $211.9 billion in FY 2023. It was due to a 9% rise in productivity & business process revenues, followed by a 17% growth in the intelligent cloud unit, partially offset by an 8% decrease in more personal computing division. On the flip side, the operating margin witnessed a slight drop in the year. This coupled with higher effective income tax as compared to 2022, resulted in a 1% drop in the net income to $72.4 billion. 

Moving forward, we expect the Q1 2024 revenues to be on similar lines. Notably, the firm expects to record $53.8-$54.8 billion in revenues in Q1. Altogether, Microsoft revenues are estimated to touch $222.96 billion in FY2024. Additionally, MSFT’s net income margin is likely to see a slight improvement in the year. It will likely result in a net income of $77.8 billion and an annual GAAP EPS of $10.52. This coupled with a P/E multiple of just below 33x will lead to a valuation of $345.

Relevant Articles
  1. Up Nearly 70% Since The Beginning Of 2023, Where Is Microsoft Stock Headed?
  2. Up 63% Since The Beginning Of 2023, How Will Microsoft Stock Trend After Q2 Earnings?
  3. Microsoft Stock Is Up 45% YTD And Outperformed The Consensus In Q1
  4. Microsoft Stock Is Fairly Priced At The Current Levels
  5. What To Expect From Microsoft Stock In Q3?
  6. Microsoft Stock To Edge Past Consensus In Q2?

What if you’re looking for a portfolio that aims for long-term growth? Here’s a value portfolio that’s done much better than the market since 2016.

 Returns Aug 2023
MTD [1]
YTD [1]
Total [2]
 MSFT Return 0% 40% 488%
 S&P 500 Return 0% 19% 105%
 Trefis Multi-Strategy Portfolio 0% 29% 314%

[1] Month-to-date and year-to-date as of 8/1/2023
[2] Cumulative total returns since the end of 2016

Invest with Trefis Market Beating Portfolios
See all Trefis Price Estimates