Recovering from their late September hiccup, Microsoft (NASDAQ:MSFT) shares have bounced back. In fact, MSFT stock just hit a new all-time high after the release of its latest earnings report on Oct. 26.
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But when it comes to investing in this tech titan, its short-term price performance is not what you should focus on.
Its continued appeal as a buy-and-hold position is most important. From time-to-time, shares will go on out-sized runs higher. Other times, it’ll see volatility, and make large, temporary moves lower.
Yet over the long-term, MSFT stock stands to keep on delivering solid returns to investors.
After its incredible run through the Covid-19 pandemic, it’s up more than 100%. Impressive, given that even at around $150 per share, it already sported a more than $1 trillion valuation. However, don’t take its high market capitalization ($2.3 trillion) to mean it has topped out.
If you own it today, there’s merit in staying long, and holding on. Let’s take a closer look at what to expect from Microsoft stock moving forward.
How MSFT Stock Could Fare Post-Pandemic
Like with other tech titans, so-called pandemic tailwinds played a big role in the run-up in price with MSFT stock. Due to the Covid-19 lockdowns, and subsequent “work from home” trends, growth for its Azure cloud business accelerated. So did growth for its cloud-based Office 365 platform.
With this, you may be concerned that, as the world is in the middle of “recovery mode,” a slowdown in growth lies ahead. Yet with trends like as the “Great Reshuffle” (permanent hybrid remote/at-home workplace post-Covid), as well as analyst estimates of 14.7% earnings growth next fiscal year (ending June 2023)? I wouldn’t worry too much about the stock having a post-virus “hangover,” that we might see with other tech names.
If that’s not enough, it’s not just the prospect of continued strong earnings that point to gradual gains ahead for MSFT stock. As I discussed earlier this month, the company’s dividend and buyback policy also bodes well for shares.
Recently, the company made two moves that will return capital to shareholders. First, it raised its quarterly dividend from 56 cents per quarter, to 62 cents per quarter. Along with this, Microsoft’s board authorized a new share repurchase program. Under this program, the company is able to buy back as much as $60 billion worth of shares.
Dividend increases and buybacks by themselves won’t spark a big rally. Yet working in tandem with continued earnings growth, it’s more than enough to drive further gradual-but-solid long-term gains.
The Verdict With MSFT Stock
Trading at a price-to-earnings ratio of 35x, Microsoft shares may trade at a much higher valuation now than they have for most of the past 10 years.
But market conditions (as seen with other tech stocks’ valuations) help support this multiple. In addition, the growth acceleration Microsoft’s seen since the late 2010s — thanks to its exposure to cloud computing trends — help justify this valuation as well.
Gains from here onward may come in at a more gradual pace. That’s especially true considering it has already climbed 48% year-to-date, and the fact that it has more than doubled since March 2020.
But, regardless, MSFT stock remains a solid long-term play that you should keep in your portfolio.
On the date of publication, Louis Navellier had a long position in MSFT. Louis Navellier did not have (either directly or indirectly) any other 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.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (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.
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