So what’s everyone’s take on $MSFT (+0.37%) right now?
Heard today on a call that a lot of institutions are starting to add again to quality SAAS positions in names like $MSFT (+0.37%)
$CRM (+0.49%)
$SAP (-0.88%) with the view that the recent bear run across enterprise software may have been overdone. I would be staying clear of companies like $ADBE (+0.52%) but i cant help but think that $MSFT (+0.37%) is an interesting play.
Over the last 12 to 18 months, a lot of software names have been hit pretty hard as the market rotated away from high multiple growth and towards profitability, cash flow and AI monetisation. Rising rates compressed valuations, enterprise spending slowed, and there were concerns that companies would cut back on cloud and software budgets after the huge post COVID expansion cycle.
At the same time, there’s also been a growing debate around whether AI could actually disrupt parts of the traditional software model itself, especially for smaller SAAS companies without real moats.
But when you look at names like $MSFT, it feels slightly different. You’re talking about a company with massive recurring revenues, deep enterprise integration through Office, Azure and Teams, one of the strongest balance sheets in the market, and arguably one of the best positioned companies globally for AI deployment and monetisation.
The bear case is obviously valuation and whether AI expectations have got too far ahead of themselves. But the bull case seems to be that institutions are now starting to differentiate between speculative software and genuine quality compounders with real cash flow and pricing power.
Feels like the market may have thrown out some quality names together with the weaker SAAS stories.
Polite thoughts?
