MSFT - Microsoft - The Emperor Without (as many) Clothes
Maybe that is too extreme, but it hopefully caught your attention: I put a short sale recommendation last summer and MSFT had an excellent down-move from that publication. Now MSFT has made another earnings announcement, it's time to revisit and see what valuation looks like.
What is wrong with Microsoft now that the price is pushing a new high? Well, the valuation is a problem.
The PSR or Price-to-Sales Ratio. The value of the company as a multiple of the underlying revenues of the firm is up to and above the peak of 4.77 times seen at the 2010 high. And back then MSFT had 25%+ and rising margins and today they have 13.5% and declining margins. That is a huge difference. Revenues are experiencing slower growth these days, far from the strong growth MSFT saw through the 1980's-1990's and 2000's.
I believe their is a time when you have to just vote with your feet and walk away from investments. Timing their ultimate demise is a whole different business and one which I love to be part of and attempt to help you get in and get out investments at the right time to experience the least amount of stress, dissonance, doubt, or financial loss while at the same time getting the maximum gain possible given the risk taken.
MSFT 54.92 last, November 7th Friday's close.
I rate MSFT a "SELL" - "EXIT" - "UNDERPERFORM" the market going forward. If it doesn't underperform, the market must know something I don't or the people that buy MSFT just have more money than sense at this level. Ok, that sounds harsh. But, maybe I'll do even more research and see what I can find to prove myself wrong. Feel free to add your fundamental insights.
Tim
What is wrong with Microsoft now that the price is pushing a new high? Well, the valuation is a problem.
The PSR or Price-to-Sales Ratio. The value of the company as a multiple of the underlying revenues of the firm is up to and above the peak of 4.77 times seen at the 2010 high. And back then MSFT had 25%+ and rising margins and today they have 13.5% and declining margins. That is a huge difference. Revenues are experiencing slower growth these days, far from the strong growth MSFT saw through the 1980's-1990's and 2000's.
I believe their is a time when you have to just vote with your feet and walk away from investments. Timing their ultimate demise is a whole different business and one which I love to be part of and attempt to help you get in and get out investments at the right time to experience the least amount of stress, dissonance, doubt, or financial loss while at the same time getting the maximum gain possible given the risk taken.
MSFT 54.92 last, November 7th Friday's close.
I rate MSFT a "SELL" - "EXIT" - "UNDERPERFORM" the market going forward. If it doesn't underperform, the market must know something I don't or the people that buy MSFT just have more money than sense at this level. Ok, that sounds harsh. But, maybe I'll do even more research and see what I can find to prove myself wrong. Feel free to add your fundamental insights.
Tim
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