Microsoft Stock: What Q4 Earnings Could Mean for the Market?

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by Sofiko Abeslamidze · 3 min read
Microsoft Stock: What Q4 Earnings Could Mean for the Market?
Photo: Robert Scoble / Flickr

The cloud-based technical offerings along with the bad luck of Microsoft’s rivals served the company the highest market capitalization in the world. Analysts advise moneybags, who are looking for a better place for their capital, invest into Microsoft’s “golden stocks”.

As we live at the stack of digital transformation, the companies whose expertise revolves around a technical domain are now drawing maximum attention. It seems like everyone has finally put up with an inevitable hi-tech reality that gradually transforms not only our business activity but the way we think about the world.

Almost on daily basis, the tabloids announce another glorious breakthrough that is going to automate, simplify or bypass mundane workloads. Nowadays the demand for advanced technological solutions is reaching the highest heights.

Consequently, even the biggest technology companies with the long-standing expertise in the sphere face tough competition. We are speaking of the top four tech companies that are in a continuous race for dominance — Microsoft, Amazon, IBM and Apple.

Earnings Season is Open

Both investors who have already dipped their toes in the stock market and those who only consider becoming a stockholder are looking forward to the earnings season when major public companies announce their quarterly and annual earnings.

This week Microsoft, Amazon and Apple — all is going to report, as do a quarter of the S&P 500 and nearly half the Dow stocks. The perfect timing to make up one’s mind towards potential investments.

The stock market analysts crave to see the Microsoft’s report that is due on Wednesday because the company has won over the first place in terms of market capitalization being narrowly ahead of the retail giant Amazon and iPhone’s supplier Apple. Many believe that Microsoft’s report will have a huge impact on the overall market.

Microsoft Beat IBM Showing Better Dividend Growth

Out of the top-4  tech giants, a pair Microsoft-IBM has always been the most ravenous. The two companies are operating in the overlapped industry sectors, thus they are permanently at the brink of war. However, today Microsoft showcases a better market performance comparing to IBM.

Although IBM is offering a great dividend yield of 4.7 %, it faces several challenges that have made it difficult for the company to grow in recent years. Among the core issues hindering the IBM’s development was named the company’s delayed transformation from a legacy system to the nascent cloud technology.

By the time the company has realized its tremendous potential, the niche was filled with fast-paced enthusiast like Microsoft, whose cloud service Azure has largely contributed to the company’s prosperity.

Further analysts say that the dividend growth reported by IBM was artificially boosted by repurchasing shares instead of being nurtured on free cash flow. IBM literally experience difficulties with cash, as the company has $21.5 billion of net debt on the balance sheet without consideration of the financing required for the recent purchase of a $34 billion cloud platform Red Hat. After all, everything indicates that IBM might have troubles increasing the dividend growth in the future.

Microsoft, on the other hand, is soaking in cash and the company’s operating performance has been stellar. At the end of the Q3, the software giant had $59.7 billion of net cash and generated $32 billion of free cash flow over the last year. Today Microsoft pays out 40% of free cash flow in dividends promising to raise the amount over time.

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Sofiko Abeslamidze

Sofiko is a freelance fintech copywriter at Coinspeaker. With a Bachelor degree in International Business and Economics, Sofiko has been deepening her knowledge of an agile innovative industry primary focusing on the robust blockchain technology and cryptocurrencies. As a bank employee, Sofiko particularly keens on crypto and blockchain integration into the established banking systems.

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