Investment Analysis of Microsoft [MSFT]

***Please note that this does not constitute a stock recommendation for buy or sell. This is purely my own analysis and is to be taken as my own personal opinion and not to be taken as correct. Kindly do your own diligence in purchasing stocks.

With the release of chatGPT by openAI in November 2022, there is a lot of hype surrounding AI and AI related stocks. Microsoft even released a post regarding its partnership with openAI to accelerate breakthroughs in AI. However, Microsoft has also been in the news to join in the rest of the tech companies in layoffs – they have just announced layoffs of 10,000 employees and released its Q2 2023 earnings. Such news aside, as a company stock now, is it worth investing in it with rumours of incoming recession? Let’s take a deeper look at its business.

Anyone who uses a computer or has worked should be no stranger to some of Microsoft products. They have grown a lot since back in the day under Bill Gates, growing from selling licensing softwares to developing its own suite of hardware products, Azure cloud services, LinkedIn and gaming products (Xbox). These are classified into 3 broad categories – Productivity & Business Processes, Intelligent Cloud and More Personal Computing. Honestly speaking, it is somewhat quite diversified for a tech company.

For the last quarter, revenue is up slightly but net income is down. Comparing year on year 2022 against 2021, the earnings doesn’t seem as bad as expected. Yes, there is a slight decrease in net income, but the company is still highly profitable. On the top line, Productivity & Business Processes and Intelligent Cloud have actually increased in revenue and net income, with the main drag coming from More Personal Computing. Microsoft Cloud has a healthy gross margin percentage of 72%. What does More Personal Computing contain? It actually contains several product lines such as Windows OEM, Windows Commercial products and cloud services, Devices, Xbox content and services, and lastly Search and news advertising. The main drag from More Personal Computing is from Windows OEM (the Windows 10 system preinstalled in computers made by original equipment manufacturers.), devices and Xbox. All these which I feel are still fair. The main engine of growth now would probably be from the Microsoft Cloud service.

All things considered, with Microsoft being still a very profitable company and having tailwinds of the AI hype and mania, I would still consider Microsoft a good buy and I have initiated a small position in it. In addition, the Federal Reserve will be taking a breather on the interest rates, and this will cause USD to depreciate and hopefully this will help in its revenue. The thing is that I have not considered an exit point at this point in time and for now, my strategy for US stocks in my portfolio would be industry rotation. Soft tentative target would be to start considering once the share price hits 300 USD a piece. Though its highest so far have gone up to 343 USD approximately. I can only hope that I am able to offload at the correct time, being mindful of potential recession currently in the chatter.

Any thoughts or comments? Let me know what do you think or if I am wrong in any area.

Personal Reflection on 2022

In a world that’s constantly moving faster and faster, especially so in a country like Singapore, it is really difficult to take some time off the busyness of just doing things, to slow down the pace of life and have some time to think and reflect. The year 2022 has already ended and 2023 has begun, but it has not yet registered in my mind as I was too caught up with doing things, and to me, I was still living in 2022. Hopefully with this post, I’m able to have some reflection and closure to 2023, and be able to live in 2023.

2022 was yet another difficult year. Many things have happened globally, and in my personal life as well. My wife gave birth to our daughter, and I changed jobs. It might not be earth-shattering news to share, but these 2 things affected me in a significant way. I have a separate post dedicated to my daughter, which I won’t elaborate here, but for my job, despite moving to a job with lower pay, it has been a lot better for my mental health. It is also quite ironic, that I seemed to have joined my dad’s previous job industry (ie travel), who worked at Singapore Airlines previously. It has been a positive move so far, the people are nice, good benefits, the only downside I see is the renumeration package, and possibly the lack of upwards progression, but we shall see about this. With my daughter as well, there might be some change in priorities.

Regarding the change in priorities, I guess I am struggling with the need to push harder for progression, or to take it easier a bit, enjoy the time, or to pursue alternative sources of income. I am still trying to balance my time and attention spent on those, as my mental capabilities is no longer how it used to be, and I need to be more mindful of how I spend my time. Hopefully I will not tire and burn myself out too much, as my mental health has really taken a significant hit recently, and I’m trying to find a way to recover well. There has been many sources of stress, which I probably won’t elaborate here, but hopefully things will get better.

In terms of spiritual life, it seems to be almost non-existent. I do care enough to write about it and think about it occasionally, but there really has been a serious regression on this front. I’m really not sure how to improve this area but I probably need to take care of my mental health first. This might just be a constant new year resolution to do, and yet somehow failing to do so along with fitness goals each year.

Surprisingly, there isn’t much I can think about to write about 2022 at this point in time, and yet I feel a lot better after writing the short paragraphs above. This might just be reflective of what 2022 was, a year of mad rush, just ticking items off the to-do list. I don’t really feel a lot for 2023 at the moment, but I’ll probably write another post about my new year resolutions and a list of items I want to accomplish, or perhaps I’m still slowly trying to come to terms with the end of 2022, but hopefully I’ll have sufficient time to rest and recharge for now, to be prepared for yet another fast paced year.

Yea, so there’s no more thoughts about 2022 that I can put into words for now, but for me, this post is a good closure for 2022 and I’ll think about 2023 in a further post. Happy new year everyone and hope 2023 is a better year for everyone!