MSFT Digs Us Out of a Hole
The 14% selloff year to date in tech shares finally met its match when Microsoft (MSFT) soothed us with its most recent quarterly performance.
It’s starting to feel like a broken record, but this world belongs to 5 large Silicon Valley tech companies and for the rest of the other few hundred publicly listed companies, we are just living in their world.
And it just so happens that if anybody or anyone is anointed as the savior to save this market from capitulating, it has to be the heavy lifters and we are getting validation from the strongest of cloud/enterprise companies.
Just as resonating, MSFTs positive quarter draws yet one more line in the sand for Mr. Market, offering us support and offering us evidence this could morph into a short-term bottom.
Even more salient, this is even deeper evidence that the software sector is the cream of the crop in tech and their strategic position is only getting stronger.
The thing that these guys have that is critical in today’s economic environment is tinged with inflation headwinds — pricing power.
Starting in March, Microsoft is pushing through an MSFT 365 price hike and consumers and businesses will see their monthly bill go up a few bucks.
According to Microsoft, those increases will apply globally with local market adjustments for certain regions.
And it’s not that 365 is MSFT's cutting edge division, it’s just another example of how MSFT can raise prices and consumers have no other choice but to comply because, at this point, 365 is a utility.
Sure, you can find a substitute, but it wouldn’t be as good of a product.
It was a record quarter, driven by the continued strength of the Microsoft Cloud, which surpassed $22 billion in revenue, up 32% year over year. We are living through a generational shift in our economy and society. Digital technology is the most malleable resource at the world's disposal to overcome constraints and reimagine everyday work and life.
Anyone who bet the ranch on the cloud and enterprise is happy they bet the ranch on it.
MSFT's earnings were just a giant confirmation of how tech won’t be knocked off its perch as the apex warrior, not only in the Nasdaq index but the broader market.
The stock market has been a tech market for quite a few years and that can’t be ignored or discounted.
Fundamentally, the foundations of profitable tech stocks have never been healthier, and they are extracting more of the pie than ever.
Then as we hear nonstop about the upcoming metaverse project and its entryways through gaming, MSFT is so on top of that new development that they will put all other companies to shame.
Granted, there are other heavyweights like Apple (AAPL), Amazon (AMZN), Alphabet (GOOGL) that MSFT must take measures of to see if they are pushing ahead with something they are unaware of, but all is good is Redmond, Washington.
As data volumes and transactions increased over 100% year over year, MSFT has a grip on what’s going on and can quickly pivot to anything that’s worth it with its army of high-quality developers.
MSFT’s ubiquitous fingerprints are everywhere with even over 90% of Fortune 500 companies using Teams Phone this past quarter highlighting the deep penetration into the richest corners of corporate America.
My overarching point is that MSFTs products aren’t just a one-trick pony ala Facebook.
More than half of customers have four or more MSFT workloads, up 75% year over year, underscoring MSFTs end-to-end differentiation.
On a short-term trading basis, traders must adopt tech winners with robust balance sheets, and this must be looked at as a dealbreaker or deal winner of sorts.
In a world that is clamoring for quality tech names, it’s no time to allocate your hard-earned savings into Podunk technology.
Once the macro washout fades, pile into MSFT!
What I am saying is that there is a great deal of the market to plain out avoid, and don’t get caught up in those lemons.
