Start the conversation
Microsoft Corp. (Nasdaq: MSFT) is a laggard no more.
After more than a decade of bobbing around the $30 mark, Microsoft stock is up 70% since April of 2013.
Money Morning Capital Wave Strategist Shah Gilani recognized the surprising turnaround early on, and started publicly recommending MSFT stock in July 2013.
Back then Gilani liked that Microsoft paid a dividend that was likely to rise, and predicted a "shake-up" at the Redmond, Wash.-based tech giant that would propel MSFT stock to $50 before the end of 2014.
"Other analysts thought I was way out on a limb… swinging over a river of hungry crocodiles," Gilani said later. "They thought I was wrong because they believed that Microsoft couldn't change its ways. But I knew differently. As I said during a number of interviews, I knew Microsoft could change. In fact, I knew it had to change."
Just a little over a month after Gilani's original call, CEO Steve Ballmer announced he would retire in the next 12 months.
That paved the way for new CEO Satya Nadella to take over in February. And that's a huge reason behind MSFT's rebound…
MSFT Stock Driven by Its "Cash Machine"
Nadella's fresh approach has helped pushed Microsoft stock to Gilani's target price of $50, which it hit in intraday trading Nov. 14.
Since Nadella took over, Microsoft has had several solid earnings reports. In its most recent quarter, Microsoft grew revenue 24.8%, for example, partly because of a 47% increase in its "devices and consumer business" and a 128% increase in its cloud business.
In April Gilani described the company as a "cash machine" when he again recommended investors buy Microsoft stock.
"Over the last 10 years, MSFT's cash return on invested capital has risen to 93%. That means that – for every $1 of capital it has invested – Old Mr. Softy has been able to generate $0.93 in cash. Yeah, you heard that right. Over the last 10 years, Mr. Softy had been a cold, hard cash machine. On a sales basis, for every $1 in sales the company generates, $0.35 gets turned out as free cash flow (FCF). Over the last 10 years, Microsoft has grown its FCF by 9%," Gilani said.
But now that it has hit $50, is Microsoft stock a buy? Or should investors take their profits and move on?
About the Author
Dave has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.