Microsoft Rg (MSFT US)

Global Markets Comment

Microsoft's Azure cloud platform and Office 365 continue to be strong revenue generators as companies continue to pursue digital transformation and work-from-home practices. Pre-orders for its upcoming consoles, Xbox Series X/S, are already sold out and its acquisition of ZeniMax will bring along several big AAA game titles into the Xbox ecosystem, contributing to its GamePass subscriptions. Microsoft share prices have pulled back during September and is presenting a more attractive upside (~10%) given our target price of US$232.

Performance since inception*

Company Profile

Microsoft is the world's largest software company, generating over $125 billion in annual revenue in fiscal 2019. Operating in over 190 countries, the company is a market leader across numerous software categories, with core solutions including cloud computing infrastructure (Azure), productivity applications (Office and Office 365), operating systems (Windows), business applications (Dynamics), Internet services (LinkedIn, Bing), database software (SQL Server), gaming and others.

Price History 1 year

Investment Case

Microsoft is the world's largest software company, generating over $125 billion in annual revenue in fiscal 2019. Operating in over 190 countries, the company is a market leader across numerous software categories, with core solutions including cloud computing infrastructure (Azure), productivity applications (Office and Office 365), operating systems (Windows), business applications (Dynamics), Internet services (LinkedIn, Bing), database software (SQL Server), gaming and others.

Price History 5 years

Risk in Investment Case

We believe that key downside scenarios for Microsoft are; 1) Cloud revenue growth decceleration as Azure growth lessens as revenue continues to mount 2) Greater competition on cloud business from AWS and Google; 3) Heavy dependence on console for its gaming business while also struggling with streaming; 4) Weakness in SMB due to COVID-19 recession; 5) High relative valuations hindering further multiple expansion..

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