The past few weeks have been exciting for investors at Microsoft Corporation (NASDAQ :). The global tech giant has been busy using its massive cash flow to position itself for future growth at a time when the rally in tech stocks from the pandemic is showing signs of peaking.
The latest moves from the Redmond, Washington-based software giant prove the company is an ideal choice for long-term investors seeking both capital growth and a growing income stream from the company’s dividend, which currently earns 0.95%.
After buying the parent company of famous video game publisher Bethesda Softworks earlier this year, Microsoft is said to be in exclusive talks to acquire the Discord Inc. messaging platform for $ 10 billion or more.
The acquisition of this six-year-old startup will allow Microsoft to strengthen its activities in the field of video games, in particular the Xbox platform, and to consolidate its presence in the field of social networks. If successful, Operation Discord would be Microsoft’s largest acquisition since buying LinkedIn (NYSE :) for $ 26.6 billion in 2016.
With this acquisition, the company also expands its role as a major supplier to the government. The company told investors in a blog post on Wednesday that it will build custom augmented reality headsets for the U.S. military in a deal that could be worth up to $ 22 billion.
The devices will be based on Microsoft’s HoloLens headset which debuted in 2016. More than 120,000 units of the custom equipment will be delivered over a 10-year period, supported by Microsoft’s Azure cloud service.
The “Netflix (NASDAQ :) of video games”
Thanks to Microsoft’s growth-oriented metrics, analysts are predicting further gains in its share price after surging more than 35% in 2020.
The 23 analysts who cover Microsoft all have a buy rating on the stock, according to Tipranks. Their one-year consensus price target is $ 279, up 15% from its Thursday close at $ 242.35.
In a note to investors last week, Morgan Stanley (NYSE :) assigned an “overweight” rating to MSFT with a price target of $ 290 per share.
Microsoft’s recent efforts to strengthen its community and content portfolios, according to the note, position the company to enable it to take a significant share of the gaming market. With some 18 million monthly subscribers to its Game Pass service, Microsoft is on its way to becoming the “Netflix of games,” the note said.
Microsoft’s expansion into gaming comes after a strong year that saw exceptional growth in its internet-based cloud computing services, Azure. This division’s growth jumped 50% in the last quarter as corporate customers accelerated their move to the cloud during the pandemic, where they can store data and run applications over the internet. For more than three consecutive years, revenue from Azure has almost doubled every quarter.
MSFT continues to expand its market share, going deeper into the cloud and games. At the same time, it maintains its leading position with its traditional software products such as Windows and Office.
This enduring advantage will help the company achieve sustained double-digit growth in revenue, earnings per share and free cash flow, making it a reliable tech stock to hold now and into the future. term.