LinkedIn And Other Segments
The Q2 earnings came after Microsoft Corporation (NASDAQ:MSFT) completed the $26B LinkedIn acquisition on December 8th. Technically Q2 earnings included few weeks of LinkedIn results as well, but Microsoft has broken out the LinkedIn performance to facilitate comparisons. The financials of LinkedIn for Q2 can be seen in the image below which brought in $228M revenue. A lot is expected from the LinkedIn acquisition. Investors would be very much interested in the LinkedIn numbers in the future quarters following Microsoft’s multi-billion dollar investment.
Source: Company earnings slide
Microsoft’s More Personal Computing segment revenues are down 5% YoY to $11.8B with declining worldwide PC sales continuing to be a headwind. Though Microsoft stated that its Xbox live users were up 15% from the year-ago quarter to reach a record 55M, it’s gaming revenues were down by 3%. The upcoming opportunities in VR/AR could give a major push to Microsoft’s gaming and PC business. Microsoft’s Surface Lineup remains a bright spot and it is profitable too. Microsoft Surface Pro 5 launch is eagerly awaited this year and its success could significantly shore up the $4.3 billion business.
The Q2 results have shown Microsoft’s resurgence under Satya Nadella. MSFT stock reaching new all time high is one clear indicator. Recently, Citi, which was a noted MSFT bear, also upgraded MSFT stock (3) to a ‘Neutral’ rating from an earlier ‘Sell’ rating. This highlights renewed optimism among analysts about Microsoft and its transition.
Putting It All Together
MSFT stock is trading at a steep earnings multiple of 31 compared to the industry average of 22. At this high valuation, MSFT stock could still be a bargain for investors if Microsoft Corporation (NASDAQ:MSFT) continues to grow its cloud business which looks very promising, for now. Microsoft is definitely not a hyper-growth investment opportunity but it offers what very few companies at present can offer; increasing dividends, regular stock buybacks and an ability to consistently deliver value in the long-term. The renewed optimism in the market about MSFT stock is reflected in its stock price. Microsoft stock is a relatively safe long-term bet, even at these levels, after the strong Q2 performance.
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The article Microsoft Corporation: Should You Buy MSFT Stock Following Its Latest Earnings Beat? originally appeared on amigobulls.com. Watch our analysis video on MSFT.
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Additional Links:
(1) http://www.reuters.com/article/us-microsoft-results-research-idUSKBN15B1L6
(3) http://seekingalpha.com/news/3238613-citi-takes-microsoft-penalty-box
