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Photo: Associated Press
MSFT Down As Market Sells Off
The broader markets are off and trading sideways as August housing sales were the second worst in a decade. Shares of MSFT are also off as investors continue to sell on the dividend news. Upcoming catalysts include upgrade cycles of Office 2010 and Windows 7; any entrance into the tablet market; the launch of Windows 7 mobile; any adoption of Azure (cloud computing); and gamer reaction to Kinect. The stock currently trades at 9x Enterprise Value / TTM Free Cash Flow, inexpensive compared to historical trading multiples.Microsoft Continues To Have Impressive Returns On Capital (SmartMoney)
Microsoft still enjoys fat profit margins and a return on invested capital that’s at least 4x what the company will pay in interest, on average, on a recent $4.75 billion sale of bonds of different maturities. Management recently increased the dividend payment. The new yield works out to about 2.6%, and payments will amount to only around one-quarter of yearly free cash flow. The shares sell at a discount of one-quarter or so to the broad market, based on earnings.
Microsoft Increases Dividend And Stock Sells Off (Microsoft)
Microsoft announced that the tech giant is increasing their quarterly dividend by 23% to $0.16 per share. The shares now yield 2.5% based on yesterday’s close. Investors had expected the dividend increase for weeks as shares have fallen over 18% since the beginning of the year. Many see this as an acknowledgment by Microsoft that they have run out of growth options, while others were upset at how small the increase was. As a result, shares sold off yesterday following the announcement. The company can’t seem to win. At least it got an incredible rate on its debt.
Daily Trader: MSFT Is A Hold Based On Technicals (The Street)
Microsoft is a ‘Hold’ at best. The current price is trapped between the tight support and resistance zones. There is volume at the bottom which will get tested and the stock is in a confirmed bearish downtrend. Resistance up above is stiff and the most likely direction remains lower. Although the lows would need to be taken out with volume expansion, if that does happen the price target is between $17 – $18 which is right at the bottom of the support zone on the long-term time frame.