Microsoft Isn’t Cheap, But Still A Good Growth Play

I guess it’s par for the course to consider the idea that a company with a market capitalization of approximately $1 trillion is not cheap, but in the case of Microsoft Corporation (NASDAQ:MSFT), it’s hard to say just how expensive, or fairly valued, the company is given its impressive continued growth and very positive long-term outlook for growth moving forward.

I’ve liked Microsoft for the past 10 years, and initiated a position around $30 a share, when the company had a dividend around 4%. The stock had stalled, and I viewed the company as a solid dividend growth play, with some great growth potential. The technology giant has more than delivered on my growth expectations (and has continued to raise its dividend, making it a great dividend growth play indeed), but it’s hard to say "sell this stock right now" as Microsoft is one of those companies that just continues to perform, delivering ever-growing earnings in an incredible way.

This will continue to be a long-term hold, in my opinion, for a few key reasons. The first is the stability of Microsoft’s underlying software business, which now acts more like a Software as a Service (SAAS) business rather than a consumer packaged goods industry.

The second key factor is the company’s burgeoning cloud business, which went on display during the JEDI contract bidding process (now Microsoft continues to fight Amazon, Inc. (NASDAQ:AMZN) for the ability to complete the $10 billion project. The cloud sector is a key battlefield for tech giants, and while Microsoft currently is not in top position in the sector (yet), expectations are that cloud computing will become a large enough pie that Microsoft, Amazon, and potentially other players can continue to eat very well, for a very long time.

Invest wisely, my friends.