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Microsoft - Long-term quality or overrated hype?

$MSFT (-0,34%)

With a little delay, here is my analysis from my blog. - I would also like to share it with you.


Microsoft - Long-term quality or overrated hype?

Microsoft is the third-largest position in my portfolio after my ETFs - and with good reason. But will it still be in the future? I have taken a close look at the figures, the market environment, the risks and the potential. And at the end I give you my honest assessment: hold, buy more or sell?

The most important facts in brief:

  • Current share price (July 2025): approx. $497
  • Valuation: Historically expensive (PER ~38, P/E >13)
  • Growth drivers: Cloud, AI (OpenAI), Office 365 subscription model
  • Risks: High expectations, geopolitical tensions, regulatory intervention
  • Conclusion: Quality share with a price tag - hold, no immediate buy, but savings plan remains exciting

1. fundamentals and valuation - quality has its price

Microsoft is one of the most profitable companies in the world. In the last financial year, sales amounted to $245 billion, the operating margin was 44%, and the bottom line was a profit of over $72 billion. Free cash flow was just under $60 billion.

But: The market has long since recognized this quality. The P/E ratio is ~38, the P/E ratio is over 13. Historically, the P/E ratio was once 20. This means that investors are now paying significantly more for every dollar of profit. The market has a lot of confidence in Microsoft.

And that is precisely the problem: anyone buying now needs confidence that growth will continue. A lot is already priced in.

2 Where does the money come from? - Microsoft's engine room

Microsoft is no longer a Windows company. The traditional business with Office licenses and Windows OEMs is declining. Instead, revenue now comes from three pillars:

  • Intelligent Cloud (42% revenue): Azure, servers, databases
  • Productivity & Business (33%): Office 365, LinkedIn, Dynamics
  • Personal Computing (25%): Xbox, Bing, Surface, Windows

Azure is growing particularly strongly - +33% in the last quarter. Office is also running smoothly thanks to the subscription model. Only the PC business is weakening - logically, the big hardware run is over.

Then there is the new game changer: Artificial intelligence. Microsoft is at the forefront thanks to its billion-euro stake in OpenAI (ChatGPT). Copilot functions in Office, Azure AI services, GitHub Copilot - all of these can generate new revenue streams.

3rd opportunities - what's going really well

  • Subscriptions instead of one-off purchases: Over 70% of sales are recurring - predictable and crisis-proof.
  • Cloud on course for growth: Azure is clearly the No. 2 behind Amazon AWS - but is growing faster.
  • AI leadership: OpenAI partnership and own infrastructure pay off.
  • Moat (moat): Office, Windows, Azure - no company just switches it up.
  • Endless cash: Microsoft can put billions into innovation every year or buy back shares.

4. risks - where things can get dicey

  • Valuation: Microsoft is expensive. Very expensive. If growth falters, share price pressure threatens.
  • Regulation: EU, USA - more and more politicians want to rein in Big Tech. Especially for Cloud & Office.
  • Competition: Amazon (cloud), Google (workspace, cloud), Apple (chips), Oracle, IBM, Alibaba in China.
  • China risk: Azure China only runs via partners, market access could be restricted by politics.
  • Macro: Higher interest rates = less investment in IT. Plus currency effects & inflation.

5. DCF & valuation - What is the share really worth?

A conservative DCF model (8% discounting, 2% perpetual growth) arrives at a fair value of $350-380 per share. The market sees it differently - analyst targets are around $500-520.

I say: a lot of fantasy is already priced in. Anyone buying today is speculating that AI, cloud & co. will bring in much more than previously expected. Possible, but not a sure-fire success.

6 Conclusion - What do I do with my Microsoft position?

For me, Microsoft is a clear hold candidate. The company is rock solid, globally positioned, innovative - and I am happy to have it in my portfolio. But:

  • Buy more? Not immediately. The valuation is simply too high.
  • Sell? No. If you are invested for the long term, stay in.
  • Savings plan? Yes, in small tranches. If you buy regularly, you can also take advantage of setbacks.

Personally, I am holding my position, not adding to it at the moment, but keeping the savings plan running. If there are setbacks - due to interest rate fears or regulatory intervention, for example - I am prepared to add more.

Disclaimer: No investment advice. Everyone has to find their own strategy. I share my thoughts and decisions here - no more, but also no less.

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9 Commenti

immagine del profilo
If I want to buy & hold quality stocks, $MSFT is a basic investment for me
16
immagine del profilo
@Multibagger absolutely. Especially because I'm also an MSFT customer in my main job in IT - this license mafia is really tough. An absolute money printing machine.
1
immagine del profilo
@SteFinanz Yes, the moat is insurmountable, even in the near future, a main criterion for me for a buy & hold stock
2
immagine del profilo
@Toooom Yes, I think so too. Everyone who switches to linux goes back to MS.
And cloud business is booming, especially with openai.
1
immagine del profilo
@SteFinanz We have both Windows and Ubuntu in our office. Both are fine for our activities.

As a $MSFT shareholder, I am of course still Team Windows ;)
1
@Multibagger I agree, if you want a solid quality stock without great volatility and "Tammtamm", you can't go past Microsoft or do anything wrong with it!
1
I work in a large unlisted company with six-figure colleagues. We will be moving from Microsoft to Google in 2026. I'm curious to see how this change will affect the company.
1
immagine del profilo
Over the next 12 months, I see myself positioned in a different share.
My investment horizon is medium-term - around six months to two years. Apart from that, my current position has performed well so far. Although the dividend is manageable, which I generally see as positive, Europe currently makes a more stable impression on me.

I'm letting the share run for the time being, but I'm keeping a close eye on it.
With a long-term investment horizon, none of this would be relevant anyway. To be honest, NOT THE RED VALUE AT ALL!

However, I would add Adobe and UiPath to my portfolio in small amounts. (Yesaaa is Americaaaa)
immagine del profilo
I see $MSFT at 600$
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