What is the significance of 1986?that year microsoft (MSFT -0.47%) The stock was first listed on the public market. In its early days, the company focused on software for personal computers, such as his Windows operating system and Microsoft Word.
But a lot has changed since then. Today, Microsoft is thriving not just in software, but in hardware, games, and even cloud computing.
This thirst for expansion has led to a stock price surge over the past 36 years, and even though the company lost 28% in value in 2022 in a tough economy, Microsoft’s early investors certainly I am calm today.
It shows exactly how much these investors have been rewarded for their patience.
Windows, Office, Azure, Xbox, and Surface
These are just some of Microsoft’s most recognizable brands. The quintessential consumer goods company where Windows and Office have been adopted by billions of users worldwide. However, in 2022, the consumer segment performed poorly as engagement and revenue across the Xbox gaming ecosystem tapered off and sales of the Surface line of laptop computers and tablet devices softened.
In addition, it is currently trying to acquire a game development studio. activision blizzard It demanded $69 billion, but the US Federal Trade Commission sued Microsoft and blocked the deal. The government worries that too much market power will be concentrated in Microsoft. Because the company could theoretically reserve top games for the Xbox platform and lock out competitors.
But while that battle is heating up, the company continues to grow rapidly in the cloud services segment. Azure is a cloud platform that serves enterprises to enable digital transformation, whether you need to develop software, build databases, or even access advanced machine learning tools.
Azure revenue increased 35% year-over-year in the recent first quarter of fiscal 2023 (ending September 30). This was three times the pace of Microsoft’s overall revenue growth of 11%. And the cloud industry is expected to triple from $483 billion in 2022 to $1.5 trillion annually by 2030, according to Grand View Research, so the company still sees this opportunity. may be in the early stages of
Microsoft is unstoppable in the long run
Some of Microsoft’s businesses may continue to experience slow growth in the near term, as inflation and rising interest rates are now reducing consumer spending power. However, with some early signs that these headwinds are easing, 2023 could prove to be a more favorable time for brands like Xbox and Surface.
But Microsoft has, and always has, been a long-term story. When the company went public 36 years before him, annual revenue was just $197 million. By fiscal year 2022 (ending June 30), that figure has increased 1,000 times to his $198 billion.
Sure, there were some bumps along the way, with the company’s growth stifling in certain years (during the financial crisis) like 2009, but the chart below shows a very clear trajectory. increase.
The value of a $1,000 investment in Microsoft’s IPO today
Microsoft completed its initial public offering (IPO) on March 13, 1986 at $21 per share. Since then, the company has grown to be very valuable and the stock price has skyrocketed so much that management has taken the time to choose to implement a 9 stock split to give smaller investors access to the shares. I made it possible.
If you invested $1,000 in Microsoft in the IPO, you would have acquired 47 shares at $21 per share. Adjusting for the stock split, he actually owns 13,536 shares on a cost basis of $0.0729 per share.
Given that Microsoft is currently trading at $238.73 per share, that translates to a return of 327,401%.
Converted to dollars, a $1,000 investment in 1986 is worth a whopping $3.23 million today. But Microsoft has been paying dividends since his 2003, so things get better. Assuming he didn’t sell a single share along the way, he also received a dividend of $341,513.
Assuming Microsoft continues to pay a quarterly dividend of $0.68 per share, it would earn $36,817 each year, or 36 times its initial $1,000 outlay. That is the strength of long-term investment.
Is Microsoft Stock Still a Buy Today? Because it operates in so many diverse and transformative industries that serve both consumers and businesses, over the next 10 years, the stock will likely continue to thrive. It’s likely to remain a safe bet. With a 28% drop in 2022 amid the economic downturn and overall stock market decline, this could be a great time to buy.