The stock market is at a multi-year high. Microsoft Corporation (NASDAQ/MSFT) broke to a new 52-week high on Thursday on mounting optimism that this past Wall Street tech star can regain its lost glory in the stock market. The hope for Microsoft rests on the new to-be-released “Windows 8” operating system and the company’s push to become a player in the lucrative but competitive smartphone and mobility sector. The company is also faring better with wide acceptance of its “Kinect” and “Xbox” console that is taking away market share from the incumbent “Sony PlayStation 3” and “Nintendo Wii.”
The stock has been a disappointment over the past decade, becoming viewed as a boring technology play in the stock market with limited growth and a lack of vision. The push into mobility and gaming should be able to add some spice to the stock, which still trades as a commodity tech stock at 10.76X its fiscal 2013 earnings per share. I feel that Microsoft deserves a higher valuation in the stock market. CEO Steven Ballmer will need to convince Wall Street that Microsoft could be the next technology starlet.
So, while the stock market has recorded impressive gains from other key tech companies, namely Apple Inc. (NASDAQ/AAPL) and its $506-billion in market-cap, Microsoft has been a the market laggard amongst the large mainstream technology companies.
I’m not saying Microsoft will become one of the top stocks, but the company could become more attractive to growth investors. As I said, gaming is adding spice, but the potentially strong surge in the stock I see as possible will be dependent on its mobility business. Microsoft has ventured with Finnish Nokia Corporation (NYSE/NOK) to battle in the smartphone space where Apple is king and not looking to give up its perch on the top of the smartphone sector.
I view Microsoft as a contrarian pick in the stock market. The stock market always provides opportunities and Microsoft appears to be worth a look if the company can execute.
Microsoft has seen its stock do nothing for the past decade in the stock market where it has been dead money for investors, while other stocks have made enormous returns.
But the time appears to be ripe for Microsoft to break out of its sleep as a boring former high-flying technology stock that needs a kick to drive up the share price and attract buyers. The company needs to generate the excitement it once had in the stock market. Merely introducing a new operating system every few years is not enough.
Another interesting attraction for investors is the fact that Microsoft owns the hugely popular “Skype” communication application, which should help to strengthen the product offering in the “Nokia Windows Phone.”
Just imagine the opportunities for Microsoft given the size of the global cell phone market. There are estimated to be over five billion cell phone users, according to the United Nations. That is a lot of phones so the battle for market share will be intense.
The demand for smartphones will continue to grow rapidly as we see more and more content and applications move to the mobile phone. Mobile broadband is becoming more significant. There are estimated to be over one billion broadband subscribers in 2010, according to the International Telecommunication Union. This is why smartphones are becoming more critical products and why Microsoft needs to be there.
In a few years, Microsoft may become one of the stars for growth investors.
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