Microsoft on the verge of overtaking Apple as the world’s most valuable company
stocks hit all-time highs on Wednesday and the company threatens to overtake
position of the most valued public company in the world. The move comes after the software giant produced another stellar earnings report, driven by accelerating demand for cloud computing services and surprising resilience in PC demand.
Microsoft shares (ticker: MSFT) at the start of trading on Wednesday rose 4.4% to $ 323.77, taking its market cap to $ 2.43 trillion. Apple (AAPL) is down 0.2%, to $ 148.97, giving the company a market cap of $ 2.46 trillion. If Microsoft hit $ 333, it would hit a market cap of $ 2.5 trillion; at $ 327.38, it would equalize Apple’s market cap, assuming its shares remain unchanged.
For its fiscal first quarter ended Sept. 30, Microsoft reported revenue of $ 45.3 billion, up 22% from the quarter a year ago and above the consensus of Wall analysts. Street for $ 44 billion. Non-GAAP earnings were $ 2.27 per share, 20 cents above Street’s consensus of $ 2.07. The company has exceeded its own forecasts across all industries, with exceptional performance thanks to Azure, Office 365, LinkedIn, Xbox and Windows. The company’s Windows business grew in double digits, despite continued stress over PC shortages.
Better yet, Microsoft provided a forecast for the December quarter that exceeded Street’s revenue estimate by around $ 2 billion. Microsoft’s habit is to give prospects by business, rather than offering a single estimate of turnover.
CFO Amy Hood told investors on the company’s earnings call they expected revenue from the Productivity and Business Processes segment, which includes Office, of $ 15.7 billion to $ 15.95. billions of dollars ; for
ligent Cloud, which includes Azure, from $ 18.1 billion to $ 18.35 billion; and for More Personal Computing, which includes Surface, Advertising, Windows and Xbox, from $ 16.35 billion to $ 16.75 billion. At the top of the range which would be $ 51.05 billion, the company’s first quarter with more than $ 50 billion in revenue, and up 18.5% from a year ago.
The company has seen huge demand for Xbox hardware, with better than expected console availability despite component shortages. Strong Windows business (Windows Commercial revenue increased 12%) suggests continued strength in PC business, despite recent poor results from
(INTC), whose growth has been hampered by reduced production at some laptop makers struggling with parts issues.
Almost all of the analysts who follow Microsoft have raised price estimates and targets for Microsoft in the wake of the results being announced.
Keith Weiss, for example, repeated his overweight rating on the stock, dropping his target price to $ 364 from $ 331. Like other analysts, he is impressed with the company’s ability to grow revenue by more than 20% at an annual rate of more than $ 180 billion. It does so, he says, with a software package that matches all of the key IT trends, including cloud computing, digital transformation, and security. And he says that with a price / earnings / growth ratio of 1.4 times, compared to a historical average of twice, Microsoft “represents a rare story of secular growth in software with the possibility of multiple expansion.”
Cloud business is the center of the story, and Microsoft’s growth rate in this area continues to exceed expectations, with Azure up 50% in the September quarter. âNot only does Microsoft operate the largest cloud computing company in the world that could reach a scale of over $ 100 billion within three quarters, but the growth profile of 36% is well above the growth rate of the cloud industry by 28%, which implies that it is also gaining market share, âwrites Piper Sandler analyst Brent Bracelin, who repeats his overweight rating and increases his price target to $ 352 from $ 310.
With today’s move, Microsoft shares have almost reached parity with Apple on a market cap basis. The company has overtaken Apple on several occasions – in 2010 and again in 2018 – but this particular change could have legs, for several reasons.
On the one hand, Microsoft is simply growing faster. The Street Consensus calls on Microsoft to increase revenues by 14.3% in its June 2022 fiscal year and 13.1% in fiscal 2023. For Apple, Street expects a sharp deceleration after the disproportionate growth during the pandemic period – consensus estimates project 33% growth in fiscal 2021, falling to just 4% growth in fiscal 2022. Microsoft has a higher dividend yield, at 0 , 8% against 0.6% for Apple, although Apple was more aggressive in the repurchase of its shares.
Microsoft also seems better placed than Apple in terms of regulatory control. How ironic: Microsoft was targeted in a 1998 case by the Justice Department as an illegal monopoly for its control of the PC software market, and a U.S. District Court judge in fact ordered the company to be dissolved, well that society ultimately avoided this disaster. result and the case was settled in 2001. Today, Apple finds itself subject to regulatory control, particularly over its monopoly control of the iPhone application market.
Microsoft has been shut out of Big Tech’s current regulatory review almost entirely, just when it could become the biggest tech company of all.
Microsoft also appears to have perfectly sidestepped the real fallout from the component and supply chain issues plaguing device makers. You don’t need container ships to deliver cloud-based software. But Apple has warned for several quarters that supply chain issues could limit its ability to meet demand for the iPhone, in particular. We’ll have more clarity on this when the company releases its results on Thursday.
Write to Eric J. Savitz at firstname.lastname@example.org