Microsoft (MSFT 0.28%) has had an interesting couple of months. What started as a warranted sell-off to bring its valuation down to a more reasonable level has transformed into one of the biggest sell-offs Microsoft has faced in recent history. The question investors must answer is whether this sell-off is happening for a good reason or it is a mistake that presents a once-in-a-decade stock buying opportunity.
Let's take a look at what the data says and get to the bottom of Microsoft's sell-off.
Image source: Getty Images.
Microsoft doesn't have any holes in its business
Microsoft has always been one of the major providers of productivity toolsbe it its operating system back in the day or its Office suite of products. Microsoft has transitioned that role into the artificial intelligence (AI) realm and has become an integrator of AI tools in its existing product lineupas well as a facilitator in the cloud computing realm.
Azure is one of the most popular cloud computing platforms to run AI workloads on and has experienced strong growth as a result. This has trickled over into Microsoft's overall resultsand it posted revenue growth of 17% during its most recent quarter. That's impressive growth considering Microsoft's size and maturityand it's a figure that investors can't really complain about.
NASDAQ: MSFT
Key Data Points
Microsoft is a staple in the business worldand its transition into AI makes it so that it will have a difficult time being disrupted. I think this rules out needing to avoid the stockbut is this really a once-in-a-decade buying opportunity?
I think it is.
There are countless ways to value Microsoft's stock. The most common is the trailing price-to-earnings ratiobut I also like its operating earnings ratio because it removes the effect of investment gains. Regardless of which valuation measure you useMicrosoft is nearing a decade-low valuation from both metrics.
Data by YCharts. PE Ratio = price-to-earnings ratio.
Microsoft isn't in a massive crisisthe economy is doing fairly welland if we can get some stability in the geopolitical realm through a wind-down in the Iran warMicrosoft's stock could end up skyrocketing. Investors don't get this kind of opportunity with Microsoft's stock very oftenso I wouldn't be waiting for a lower price to come around. I think the stock could be slated to take off once it reports its next quarterly earningswhich should occur later in April.
There are few better values in the market than Microsoft's stockand now is the perfect time to scoop up shares.
