Huge Upside for Microsoft Stock?
Microsoft Corporation (NASDAQ:MSFT) stock doesn’t always get the attention it deserves. The company might be four decades old, but it still has plenty of growth left. Let’s take a look at three things that could turn into major catalysts for Microsoft stock.
Bill Gates started Microsoft with one product—“Windows” operating system. Several decades later, he’s happy to know that Windows has been more popular than ever before.
Microsoft released the latest version, “Windows 10,” in July of last year. Reception has been more than impressive. In less than six months since its launch, Windows 10 had been installed on more than 200 million monthly active devices. (Source: “Windows 10 Now Active on Over 200 Million Devices,” Windows Blog, January 4, 2016.)
The best part is that the momentum in Windows 10 adoption kept going. On June 29, the company announced that more than 350 million devices are now running on Windows 10. (Source: “Windows 10 Anniversary Update Available August 2,” Windows Official Blog, June 29, 2016.)
What this proves is that Microsoft is still as dominant as it used to be. Industries rise and fall, new gadgets come and go, but when it comes to operating systems, Windows is still the king. Sure, consumers are migrating from desktops to mobile devices, but Microsoft has already found a solution by making Windows tablet-friendly. As a matter of fact, Windows is the market leader in worldwide detachable tablet operating systems. (Source: “Detachable Tablets Set to Grow from 8% of the Tablet Market in 2015 to 30% in 2020, According to IDC,” International Data Corporation, March 8, 2016.)
Virtual reality (VR) is one of the hottest fields in tech. There are already quite a few VR headsets available on the market, such as the “Oculus Rift” and HTC’s “Vive.” However, there is one similar segment that could be just as big as VR, and Microsoft could be taking the lead. I’m looking at augmented reality, or AR.
Microsoft unveiled its AR headset, “HoloLens,” over a year ago. It projects a virtual world on top of the real world through a pair of holographic lenses. Once you put on the headset, you can create and shape holograms with gestures.
The device could create a whole new gaming experience. However, Microsoft is pursuing a different strategy here—it’s going to target enterprise customers first.
Michael Hoffman, a former Microsoft engineer who worked on the HoloLens project, said, “there is clearly a gaming potential there but they don’t want to put this out there as an ‘Xbox’ extension, because then nobody will say, yes, we can use this in our conferences, in our warehouses, in our hospitals. It’s wise to limit gaming early on.” (Source: “Former Microsoft HoloLens Man: It’s Not About Gaming,” The Register, April 11, 2016.)
While many companies are in the VR business, AR is a lot less crowded. With an early entrance into an industry with billion-dollar potential, Microsoft’s HoloLens could become a major revenue driver for the company.
Synergy from LinkedIn Acquisition
Earlier this month, Microsoft announced its plan to acquire online professional network LinkedIn Corp (NYSE:LNKD). Not everyone liked the idea. As a matter of fact, judging by the response from the stock market, investors were unimpressed. (Source: “Microsoft to Acquire LinkedIn,” Microsoft Corporation, June 13, 2016.)
At $196.00 per share—a 48% premium—there is no denying that Microsoft is paying a lot of money for LinkedIn. However, we should also take note of what the companies can do together.
LinkedIn does not have the largest social network platform. In fact, its monthly active userbase is only a small fraction of what Facebook Inc (NASDAQ:FB) has. However, the type of users LinkedIn has couldn’t be a more perfect match for Microsoft.
LinkedIn is known as the professional network. It has become indispensable to job seekers and human resources (HR) professionals. Microsoft also happens to offer the most widely used productivity suite to professionals—“Microsoft Office.”
As Microsoft’s chief executive officer, Satya Nadella, puts it, the merger “is really the coming together of the professional cloud and the professional network.” (Source: “Microsoft to Acquire LinkedIn for $26.2 Billion,” The Wall Street Journal, June 13, 2016.)
The more than 430 million professional profiles on LinkedIn would be an invaluable asset to Microsoft. Many of LinkedIn’s members are already familiar with Microsoft’s products. The merger would give Microsoft the opportunity to further expand its reach in the professional community.
The Bottom Line on MSFT Stock
There you have it. Microsoft might not be the hottest tech stock on the market, but with its existing business going strong, exciting future projects, and synergies yet to realize, MSFT stock investors could see further rewards.