Microsoft Corp. (NASDAQ:MSFT), a tech giant valued at $3.09 trillion, continues to be a cornerstone of the tech industry with its wide range of products and services. From Office 365 to Azure and LinkedIn, Microsoft’s ecosystem remains a global leader in innovation. Yet, Microsoft stock analysis reveals that MSFT has underperformed in 2024, raising questions about whether it’s still a solid buy.
Microsoft Stock Performance in 2024
Microsoft stock has climbed just 10.2% year-to-date, significantly trailing the S&P 500 Index ($SPX), which has risen 23.5%, and the Nasdaq 100 Index ($IUXX), up 22%. After peaking at $468 in July, Microsoft shares have since dropped by 11%.
Despite this underperformance, Microsoft remains a consistent dividend payer, offering $0.83 per share quarterly, with a yield of 0.80% at current prices. Over the last two decades, Microsoft has steadily increased its dividend, reinforcing its appeal to long-term investors.
Strong Earnings but Slowing Growth in Azure
Microsoft’s fiscal Q1 2025 earnings report showcased robust results, with an 11% rise in profit to $24.67 billion, or $3.30 per share, exceeding analyst expectations of $3.08. Revenue grew 16% year-over-year to $65.68 billion, driven by a 22% surge in Microsoft Cloud revenue to $38.9 billion.
Azure, a key driver of Microsoft’s cloud strategy, reported 33% revenue growth. However, investors were cautious after CFO Amy Hood forecasted a slight sequential slowdown in Azure’s Q2 growth to 31-32%, triggering a 6% drop in MSFT’s stock on October 31.
What Analysts Are Saying About Microsoft Stock
Despite short-term concerns, analysts remain bullish on Microsoft’s long-term potential. Citi analyst Tyler Radke recently reaffirmed a “Buy” rating with a $497 price target, emphasizing management’s confidence in Azure’s growth trajectory.
Radke noted that Microsoft expects to ramp up Azure revenue in the second half of the fiscal year, alleviating capacity constraints. He also highlighted the monetization potential of generative AI (GenAI), which could bolster future revenue streams.
With 40 analysts covering the stock, Microsoft has a consensus rating of “Strong Buy.” The average price target of $504.45 indicates a potential upside of more than 21% from current levels.
Is Microsoft Stock a Buy Now?
Microsoft stock trades at 31.7 times forward adjusted earnings, aligning with its historical average. This valuation suggests the stock is neither overvalued nor undervalued, making it a stable investment for long-term growth.
Microsoft’s diversified product portfolio, strong cloud growth, and leadership in artificial intelligence provide compelling reasons for optimism. Although recent concerns about Azure’s growth have created short-term headwinds, the company’s broader fundamentals remain intact.
Key Takeaways
- Dividend Strength: Microsoft’s consistent dividend growth over two decades supports its reputation as a reliable investment.
- Azure’s Growth: While Q2 projections indicate a slight slowdown, Azure remains a cornerstone of Microsoft’s long-term strategy.
- AI Leadership: Investments in GenAI technologies, such as OpenAI, position Microsoft for future growth.
For investors looking for stability and growth potential, Microsoft (NASDAQ:MSFT) remains a top contender despite its 2024 underperformance. As analysts project a significant upside, now could be an opportune time to consider adding MSFT to your portfolio.
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