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Best tech/finance blogger on TipRanks. Alex Cho is ranked 7th among all financial bloggers, with a sector focus of technology stocks. The research he publishes captures the long-term growth potential of tech franchises, and market valuation. His research recommendations over the span of five-years has averaged into an annualized return of 19.3% across 392 ratings of which 66% were successful. Over his years of publishing, Alex Cho has been an indispensable source of information for an investment minded audience, which is why his lifetime viewership has exceeded ten million in total since 2012, across various media platforms. Furthermore, he’s frequently cited in various local business journals across the United States, and is frequently tagged with the “in-depth” designation on Google News for his public articles. The quality of his research is well known, and is well-respected which is why he’s frequently cited by other authors, journalists, bloggers and experts. Alex Cho was a former founding partner of Alexander & Cohen Capital Management, has worked as a consultant for mid-stage tech companies looking to raise capital or form an exit strategy, with the most recent consultation billed to a client that was generating revenue of $10 million+ in the web domain/registrar segment. Alex Cho is frequently invited to interview members of management at various Fortune 500 tech companies’ due to his outstanding media credentials, and credibility. Furthermore, he frequently attends various tech media events at the request of the event organizers. Alex Cho has a great relationship with Wall Street and Silicon Valley, as well. In the Venture Capital Space, he has sources that are inclusive of VC Partners, and independent research from PitchBook, Mercury Data, eMarketer, MergermarketGroup, and so forth. Anyone facing the public with investment related material needs quality sources, which should be inclusive of insights from Private Equity and various sell-side institutions and debt rating agencies as well (Standard & Poor’s, Fitch, & Moody’s). Alex Cho publishes with the support of Bank of America Merrill Lynch, Morgan Stanley Americas, Royal Bank of Canada Capital Markets, United Bank of Switzerland AG, Barclays Americas, Goldman Sachs, J.P. Morgan, Credit Suisse AG, PiperJaffray, Wedbush Securities, Oppenheimer & Co., Nomura Securities, BMO Capital Markets, Raymond James, Pacific Crest, SunTrust, Mizuho Securities, Deutsche Bank and Canaccord Genuity. Alex Cho attended ASU via the MAPP program with a 3.76 GPA in business-finance. The genius behind Cho has less to do with his academic accomplishments, but rather his ability to navigate, adapt, and improve the quality of his work through all the activities he has engaged. In the past year, Alex Cho has launched a new marketplace service referred to as Cho’s Investment Research. To learn more about this service, or to receive article notifications, be sure sure to subscribe. We provide frequent updates via our Blog Posts, which goes out to our subscribers.

Microsoft (MSFT) Stock’s Big Rally Should Continue


Microsoft (NASDSAQ:MSFT) has been on a winning streak given its diversified business portfolio and ability to deliver growth and financial results in a timely manner. Analysts continue to rally around the stock heading into its earnings announcement on April 24, which makes sense given the momentum on the charts, and sustained interest for a variety of Microsoft’s products both for consumers, and within the enterprise as well.

The growth narrative tied to Azure Cloud drives much of the upside commentary among analysts despite the growth rate from Azure is expected to decelerate over the next couple-years. MSFT still trades at a fairly reasonable valuation at 31.35x earnings. The company’s current market capitalization is $934 Billion, with psychological resistance at $1 Trillion, or $130.37. Chances are Microsoft can reach $130 within the next couple months, assuming the stock market rally continues, and investors chase stocks at higher valuations.

Despite multiple expansion adding to the recent stock price gains, software companies tend to trade at a bit a premium multiple given the defensiveness plus recurring revenue of the business model. Just look at Adobe for example, which trades at 49x earnings right now, despite EPS growth expectations of 20%. Microsoft trades at 30x earnings with consensus expecting 14.1% earnings for FY’19. So, there’s definitely some room for Microsoft to trade at a higher when compared to other software companies in the segment.

UBS analyst Jennifer Swanson Lowe remains optimistic on Microsoft heading into Q2’19:

Microsoft shares had a slow start to the year as concerns about slower hardware purchasing from hyperscale providers and tough compares in the transactional portions of the company’s weighed on sentiment. However, our checks point to sustained demand for Azure and ongoing Windows upgrade activity as Win7 end of life looms, while a reset in expectations post Q2 should improve the setup into Q3. Stock performance has perked up in recent weeks, but valuation at ~21x EV/CY19 FCF still looks defensive, and MSFT remains one of our favorite names for CY19, offering a balance of top-line growth, margin expansion, and FCF-based valuation support.

The analyst has maintained her $125 price target on MSFT, and anticipates commercial cloud revenue growth of 39% in the next quarter:

We forecast Commercial Cloud rev. growth of 39% YoY to $9.6B on the back of 66% growth in Azure and 26% rev growth in Office 365 Commercial. Our checks continue to highlight strong demand for Azure as the platform underpinning digital transformation (growth is partially impacted by relatively mature per-user business while consumption-based business continues to remain healthy. We expect Commercial Cloud gross margin to improve 100 basis points quarter-on-quarter at 63%, based on improvements in Azure partially offset by lower-margin consumption-based services.

The stock clearly wants to trend higher, and Microsoft does have a fairly solid track-record of meeting or beating consensus expectations. While Microsoft is a mature growth stock, the current consensus still anticipates the stock to trade at $129 currently, which implies that the stock could reach $1T in market valuation over the next 12-months.

Microsoft will need to deliver some pretty solid results and raise financial outlook to get the stock trending up to $130. It seems doable given the stock’s momentum, and the valuation comparisons to some of its other software peers. Despite the catalysts tied to earnings, the summer months should also be interesting, as there’s a number of game software companies riding on this summer’s E3 conference like Electronic Arts and Activision Blizzard.

At this year’s E3 2019 Conference, Microsoft is expected to announce the Xbox 2, which will launch next year, but the preview announcement could add some excitement to the stock, as it looks to renew interest in its gaming franchise. Microsoft’s gaming business produced $10.35B revenue in FY’18 making it a big enough of a business, for Microsoft to start pouring resources into it. With the opportunity to refresh its console line-up, it would be a big opportunity for Microsoft to announce more exclusive titles developed in-house to regain momentum versus Sony, and also build a larger installed base of Xbox Live subscribers from 57 million, which has grown fairly stagnant in the past four quarters.

Bottom Line:

Improvements in gaming related announcements along with the announcement of earnings on April 24th will add some positive sentiment to the stock. Analysts seem relatively optimistic on the company and it’s hard to mess up on the announcement of a next-generation console this year, so the buzz generating commentary will keep Microsoft relevant in the minds of consumers this year.

 

Disclosure: The author has no position in MSFT stock.

Read more: Is Microsoft (MSFT) Stock Still a Strong Pick for Growth?

 

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