Should You Buy Microsoft At Current Prices?

Investment thesis

Microsoft shares (MSFT) have performed excellently in the last month after the release of first quarter fiscal 2018 earnings. The company not only continues to benefit from strong growth in its cloud business, but also its gross margins and operations have also improved considerably in recent years. However, their current P / E and EV / EBITDA ratios are currently significantly higher than their 5-year averages. Given the prospect of growing your business in the cloud, I think Microsoft is still a purchase, but I would rather wait for a setback.

Double-digit growth in its first quarter Fiscal 2018

Let me start by quickly summarizing Microsoft's quarterly result. In the first quarter of Microsoft's 2018 fiscal year, the company continues to perform very well in its top and bottom lines. Their income grew by 12% to $ 24.5 billion. Your diluted EPS grew 17% to $ 0.84 per share.

In the rest of this section, I would like to highlight some elements that I think will be useful for readers to know.

The growth in its services in the cloud is still impressive

One bright spot I like about Microsoft's first quarter earnings was the acceleration of growth in its revenue from cloud services and its expansion of gross margin. In the last quarter, its Smart Cloud Segment grew by 14% year-over-year to $ 6.9 billion. This was better than the 11% growth rate a quarter before. In addition, Microsoft's commercial cloud revenue (which includes Azure, Office 365 and Dynamics 365) grew significantly by 56% year-over-year to around $ 5 billion. The most notable growth in commercial revenues in the cloud was its platform in the Azure cloud, which grew by 90%. Microsoft now has approximately 14% of the public cloud computing market. It is still behind 32% of Amazon (AMZN) (click here), but far ahead of Google (GOOGL, GOOG).