Microsoft: Azure Is The Ace In The Hole

seekingalpha2021-08-16

Summary Azure is by far the fastest growing of Microsoft's businesses, growing at 51% year-over-year. That basic fact is unlikely to change in the near future. Azure continues to have high growth ...

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精彩评论

jimmylaw
2021-08-16
jimmylaw
Like comment
KDL
2021-08-16
KDL
The catch-up in market share is pretty amazing. Long msft.
Desmondsim
2021-08-16
Desmondsim
Like
- Timtan85:
  Ok
Deonc
2021-08-16
Deonc
A good company. Pleae like and comment.
- Huathk:
  Gd
- Deonc:
  Tq
Adrian88
2021-08-16
Adrian88
Good

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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nMicrosoft: Azure Is The Ace In The Hole\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-08-16 13:02 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4449557-microsoft-stock-azure-likely-power-future-growth><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Summary\n\nAzure is by far the fastest growing of Microsoft's businesses, growing at 51% year-over-year.\nThat basic fact is unlikely to change in the near future.\nAzure continues to have high growth ...</p>\n\n<a href=\"https://seekingalpha.com/article/4449557-microsoft-stock-azure-likely-power-future-growth\">网页链接</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"MSFT","symbol_name":"微软","start_time":0,"source_url":"https://seekingalpha.com/article/4449557-microsoft-stock-azure-likely-power-future-growth","article_id":"1171053600","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=1171053600","pubTimestamp":1629090154,"columns":[],"sourceInfo":null,"weMediaInfo":null,"summary":"Summary\n\nAzure is by far the fastest growing of Microsoft's businesses, growing at 51% year-over-yea","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"MSFT":"微软"},"translate_title":"微软：蔚蓝是王牌","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"MSFT":0.9},"content_text":"Summary\n\nAzure is by far the fastest growing of Microsoft's businesses, growing at 51% year-over-year.\nThat basic fact is unlikely to change in the near future.\nAzure continues to have high growth potential because it offers unique advantages to developers working with other MSFT products.\nIn this article, I will develop a bullish thesis on Microsoft, arguing that Azure is likely to power future growth.\n\nEthan Miller/Getty Images News\nWhen Microsoft (NASDAQ:MSFT) released fourth quarter earnings last month, they beat expectations on just about every metric. Revenue beat by $1.85 billion and EPS by $0.25. Almost every source of revenue posted significant growth, the three exceptions being Windows OEM, Surface and Xbox services. Windows OEM revenue declined by 3% year-over-year, Surface revenue declined 20%, and Xbox services revenue declined 4%.\nThis shows how crucial cloud computing is becoming to Microsoft. The biggest winners in the fourth quarter by far were cloud services ((Azure, Office 365 and Dynamics 365)), along with LinkedIn. The company's more traditional fare, on the other hand, either declined or stagnated.\nIf you'd told somebody in 2000 that Microsoft would be experiencing a Windows OEM revenue decline in 2021, they probably would have concluded that the company was done. In 2000, Windows made up 40% of Microsoft's total revenue. It was the company's best-known and most ubiquitous product. In some ways, it still is, as Windows is the Microsoft product that most individual users have the most familiarity with.\nBut it's no longer the biggest driver of revenue. In the fourth quarter, \"productivity software\" - of which Windows is a part - made up 30% of MSFT's revenue. \"Intelligent Cloud\" on the other hand made up 37%. The Q4 results showed that Cloud Services are making up a bigger and bigger part of Microsoft's already massive business. That's a good thing, too, because many of Microsoft's other business segments aren't doing so great. In this article, I will develop a bullish thesis on Microsoft, arguing that its cloud business - particularly Azure - will help drive future growth. I will also use valuation metrics to argue that the stock is not particularly expensive even with its ample growth potential.\nCompetitive Landscape\nMicrosoft is a diversified tech company that competes with a number of other tech giants in industries like computer software, hardware and gaming. It is a major player in most of the industries it operates in. Some competitors worth mentioning briefly include:\n\nApple(NASDAQ:AAPL), whose computers compete with machines that run Windows.\nSony(NYSE:SONY), Microsoft's main competitor in gaming.\nNintendo(OTCPK:NTDOY), arguably also a competitor in gaming, although it targets a very different player base than the ones who use Xbox and PlayStation.\n\nThese companies are competitors to Microsoft in the broadest sense, but aren't as relevant to the thesis presented in this article - which is that Microsoft's future growth will come from the cloud. With respect to cloud computing specifically, Microsoft's largest competitors are:\n\nAmazon(NASDAQ:AMZN), through its massive AWS business.\nGoogle(NASDAQ:GOOG), through Google Cloud.\nAlibaba(NYSE:BABA), through Alibaba Cloud.\n\nThere are many other competitors in the space, but the three above are by far the largest. The market share rankings for these firms, according to Canalys, are:\n\nAmazon's AWS, at 32%.\nAzure at 19%.\nGoogle Cloud at 7%.\nAlibaba Cloud at 6%.\n\nEach of these companies is a worthy competitor to Azure, the #2 in the space. I would argue that Alibaba is not really a major competitor, as it markets its services to companies hoping to enter the Chinese market. Azure does operate in China, but it's mostly focused on the United States. So really, Azure has two main competitors in its main geographic area - Amazon and Google - and it is second place among them. This is a solid position in the market, yet Microsoft is still a secondary player, so it can grow considerably by getting AWS customers to migrate to Azure. It can also grow by riding the growth in the broader industry, which is expected to grow at 17.7% CAGR to 2027.\nAzure as a Service\nHaving looked at the competitive dynamics in Azure's industry, we can now look at the Azure service itself. A large market share today doesn't mean a large market share tomorrow - your product and marketing need to be superior to maintain your lead. So we need to look at what Azure actually is.\nAzure is a comprehensive cloud service that includes typical features like:\n\nCloud hosting.\nData analytics.\nSQL databases - particularly those on Microsoft SQL server.\nServerless Kubernetes.\nVirtual desktops and apps.\nA marketplace with apps by third parties that run on Azure.\n\nEssentially, Azure provides a complete suite of infrastructure for cloud computing, that makes it easy for developers to build and scale their apps. In this sense it's no different from AWS or Google Cloud. However, it does have some advantages, including:\n\nLower pricing for Microsoft SQL Server.\nCash savings for clients that are also licensing Microsoft's other products.\nFree security updates.\nSecure transfer of data between regions.\n\nOverall, the Azure platform is ideally suited to developers already heavily using Microsoft software. Which is promising because many developers already use MS software before they ever choose a cloud provider.\nRecent Earnings\nMicrosoft's most recent earnings were, as stated earlier, a huge win. The company beat on both the top and bottom line, and delivered even more impressive growth in some specific segments. Azure and LinkedIn delivered the most impressive growth, followed by search advertising. The headline numbers were:\n\nRevenue: $46.1 billion, up 21%.\nOperating income: $19.1 billion, up 42%.\nNet income: $16.5 billion, up 47%.\nDiluted EPS: $2.17, up 49%.\n\nThe numbers by segment were:\n\nProductivity and business process: $14.7 billion, up 25%.\nIntelligent cloud: $17.4 billion, up 30%.\nMore personal computing: $14.1 billion, up 9%.\n\nThe \"intelligent cloud\" segment includes Azure as well as Cloud Services. These services have the potential to change the conversation on MSFT completely. If cloud revenue grows at 30% for the next four years, then it will equal Microsoft'stotalrevenue for Q4 2021 by Q4 2025. That has major implications for the stock's valuation as I'll explore in the next section.\nValuation\nMicrosoft, like most big tech stocks, trades at a relatively steep valuation. According to Seeking Alpha Quant, its multiples are:\n\nGAAP P/E: 35.5.\nAdjusted P/E: 36.\nPrice/sales: 12.9.\nPrice/book: 15.2.\nPrice/operating cash flow: 28.\nPEG ratio: 0.9.\n\nThe first five of these ratios are all pretty steep. Even the PEG ratio - low in absolute terms - is high for tech growth stocks. But recall the analysis in the earnings section above. If Microsoft's cloud services - including Azure - can keep growing at 30%, then they'll be the size of the company's total Q4 revenue in four years. If earnings grew in line with revenue, then the P/E ratio using today's price would be much lower. At this hypothetical future valuation, Microsoft would look like a steal. And in fact, Microsoft's cloud services could indeed grow at 30% for a long time. The total addressable market (TAM) is expected to grow at 17.7% CAGR for the next six years, and Microsoft is beating the industry's growth.\nRisks and Challenges\nAs we've seen, Microsoft is a fast growing business with particular strength in the Cloud. If things kept going the way they have been, Microsoft would prove to have been a steal at today's prices. But there are always risks and challenges to any investment thesis. Some challenges to mine include:\n\nLegal risk.Microsoft has been in trouble for anti-trust violations before. It was charged and convicted of unlawful monopolization in 1998, but it was overturned on appeal. It could happen again. The FTC is currently suing Facebook(NASDAQ:FB)and Alphabet, and courts in other countries are pursuing similar actions. Microsoft doesn't appear to be in the FTC's crosshairs now, but it could wind up in them in the future.\nRevenue deceleration.Prior to the most recent quarter, Azure was in a trend of revenue deceleration. Growth was 115% in fiscal 2016, it was down to 50% by Q3. In the fourth quarter the trend finally stopped, as the 51% Q4 growth beat the prior quarter. Still, the long term trend from 2016 to 2021 is one of deceleration. This is a significant risk to my thesis because a scenario I developed earlier - where cloud revenue equals Q4 2021 total revenue by Q4 2025 - depends on sustained 30% sales growth in cloud computing. If the growth decelerates down to 20% then it will take much longer for that scenario to play out.\nRisks to other business units.Microsoft is doing extremely well with Azure, but other areas of its business aren't as healthy. PC and desktop sales have been stagnating for years, and much of Microsoft's revenue comes from licenses from Windows installed on PCs. Such revenue decreased 3% in Q4. Revenue from Xbox and Surface declined 4% and 20%, respectively. So there are many areas of Microsoft's business with unfavorable sales trends.\n\nThe Bottom Line\nThe bottom line on Microsoft is this:\nIt's a mature tech company with strong growth, strong profitability, and a growing cloud business that promises to keep it relevant for years to come. At this point, MSFT's flagship Windows business is showing its age, but with Azure rising at 51% year-over-year, the company has plenty of other vehicles for growth. On top of that, the stock - while a little pricey by conventional metrics - is hardly trading at a nosebleed valuation by the standards of big tech stocks. Overall, it's a great value at today's prices.","kind":"news","is_publish_news":true,"is_publish_highlight":true,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":830446188,"gmtCreate":1629093600544,"gmtModify":1633687443357,"author":{"id":"3570772304712620","authorId":"3570772304712620","name":"jimmylaw","avatar":"https://static.tigerbbs.com/f6c847ae11f03f4682632e6fa4016040","vip":1,"crmLevel":6,"crmLevelSwitch":0,"idStr":"3570772304712620","authorIdStr":"3570772304712620"},"htmlText":"Like comment","listText":"Like comment","text":"Like comment","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/830446188","repostId":1171053600,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":830449322,"gmtCreate":1629093205966,"gmtModify":1631891460366,"author":{"id":"3555537259700212","authorId":"3555537259700212","name":"KDL","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":4,"crmLevelSwitch":0,"idStr":"3555537259700212","authorIdStr":"3555537259700212"},"htmlText":"The catch-up in market share is pretty amazing. Long msft.","listText":"The catch-up in market share is pretty amazing. Long msft.","text":"The catch-up in market share is pretty amazing. Long msft.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":3,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/830449322","repostId":1171053600,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":830421767,"gmtCreate":1629091343659,"gmtModify":1633687457352,"author":{"id":"3581894830339885","authorId":"3581894830339885","name":"Desmondsim","avatar":"https://static.tigerbbs.com/9484cf4599b477a3985c44fe04da87b3","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"3581894830339885","authorIdStr":"3581894830339885"},"htmlText":"Like","listText":"Like","text":"Like","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":5,"commentSize":1,"repostSize":0,"link":"https://laohu8.com/post/830421767","repostId":1171053600,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":5541588,"gmtCreate":1629091831794,"gmtModify":1635150469356,"authorId":3573460795152662,"author":{"id":3573460795152662,"idStr":"3573460795152662","authorId":3573460795152662,"name":"Timtan85","avatar":"https://static.tigerbbs.com/5ac241a703d94ceba483abb0655d0b6b","vip":1,"crmLevel":2,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":830421767,"type":1,"supId":0,"prevId":0,"content":"Ok","text":"Ok","html":"Ok"}],"langContent":"EN"},{"id":830462175,"gmtCreate":1629090702197,"gmtModify":1633687463209,"author":{"id":"3569316529855154","authorId":"3569316529855154","name":"Deonc","avatar":"https://static.tigerbbs.com/d9aa45dd2eb58357f6477dcfb99d1415","vip":1,"crmLevel":3,"crmLevelSwitch":0,"idStr":"3569316529855154","authorIdStr":"3569316529855154"},"htmlText":"A good company. Pleae like and comment.","listText":"A good company. Pleae like and comment.","text":"A good company. Pleae like and comment.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":6,"commentSize":2,"repostSize":0,"link":"https://laohu8.com/post/830462175","repostId":1171053600,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":5542177,"gmtCreate":1629098047764,"gmtModify":1635150429190,"authorId":3573472992263411,"author":{"id":3573472992263411,"idStr":"3573472992263411","authorId":3573472992263411,"name":"Huathk","avatar":"https://static.tigerbbs.com/43c7168c646d9ea6805194ed0003f1cc","vip":1,"crmLevel":5,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":830462175,"type":1,"supId":0,"prevId":0,"content":"Gd","text":"Gd","html":"Gd"},{"id":5546142,"gmtCreate":1629124722761,"gmtModify":1635150168729,"authorId":3569316529855154,"author":{"id":3569316529855154,"idStr":"3569316529855154","authorId":3569316529855154,"name":"Deonc","avatar":"https://static.tigerbbs.com/d9aa45dd2eb58357f6477dcfb99d1415","vip":1,"crmLevel":3,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":830462175,"type":1,"supId":5542177,"prevId":0,"content":"Tq","text":"Tq","html":"Tq"}],"langContent":"EN"},{"id":830463420,"gmtCreate":1629090341460,"gmtModify":1633687466840,"author":{"id":"4089878444731060","authorId":"4089878444731060","name":"Adrian88","avatar":"https://static.tigerbbs.com/e6c821844139b158ef20aa398c55abd1","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"4089878444731060","authorIdStr":"4089878444731060"},"htmlText":"Good&nbsp;","listText":"Good&nbsp;","text":"Good","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":3,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/830463420","repostId":1171053600,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":53,"commentSize":5,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":false,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"laohu8","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/1171053600"}