1 Magnificent Stock Down 25% to Buy Like There's No Tomorrow
Key Points
Microsoft's cloud computing platform is seeing incredible growth.
Shares of the tech giant haven't been this cheap since early 2023.
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There is perhaps no better value in the market than Microsoft (NASDAQ: MSFT) right now. It has been several years since anyone has been able to say that, and the last time Microsoft's stock was this cheap, it delivered huge gains for shareholders in a short time frame. I think Microsoft is a stock investors should be loading up on like there's no tomorrow. Here's why.
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Microsoft's stock rarely gets this cheap
Microsoft does a lot as a business. It has a gaming division with consumer hardware, business productivity software, cloud computing, and a huge investment in OpenAI, the makers of ChatGPT. This makes Microsoft a complex business to value, but with the rise of artificial intelligence (AI), Microsoft is positioned incredibly well to profit from its proliferation.
The biggest exposure Microsoft has to this trend is through its cloud computing business, Azure. Azure has become a top option to build and run AI models because Microsoft is staying neutral and not pushing one model or another on the user. Developers can pick from countless generative AI models to utilize, giving them the freedom to tailor their end product freely.
This strategy has paid off, and Azure is Microsoft's fastest-growing segment, with revenue increasing 39% year over year during its last quarter. Overall, Microsoft is doing incredibly well, with revenue rising 17% as a company. That normally results in a premium valuation, but that's not the case.
Microsoft's stock has fallen from grace and now sits at levels rarely seen this past decade. I prefer to value Microsoft's stock using its operating price-to-earnings ratio because it ignores one-time expenses and investment gains on its OpenAI investment. From this standpoint, Microsoft's stock has rarely been this cheap.
MSFT Operating PE Ratio data by YCharts
At the start of 2023, the last time it was this cheap, it was a clear buying opportunity. Microsoft's stock gained over 50% that year, and the same could happen this year if Microsoft's stock finds favor with the market. Because nothing has changed with Microsoft's core investment thesis, I'm confident that today's sale price is a gift for investors, and anyone looking for a top AI stock to buy right now should look no further.
Microsoft will be a central part of AI deployment in the world, and there are no signs of it slowing down. This should give investors all the confidence in the world that they need to buy the stock now.
Should you buy stock in Microsoft right now?
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Keithen Drury has positions in Microsoft. The Motley Fool has positions in and recommends Microsoft. The Motley Fool has a disclosure policy.
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