March 5, 2019

MSFT – Market expectations are for fading Uniform ROA, and management has concerns about cloud services, user engagement and intelligence systems


  • Microsoft Corporation (MSFT:USA) currently trades at historical highs relative to UAFRS-based (Uniform) Earnings, with a 20.4x Uniform P/E. However, even at these levels, the market has bearish expectations, and management may have concerns about Azure capabilities, gaming user engagement, and intelligence systems
  • Specifically, management may be overstating Windows 10 PC performance, classroom impacts of Flipgrid, and HoloLens’ traction. In addition, they may be exaggerating Azure’s ability to increase organizational agility, the unity of Azure and Dynamics, and cloud subscription and consumption capabilities. Also, they may be concerned about their dependency on the Intelligent Cloud and Intelligent Edge, and large contract bookings. Finally, they may be overstating their identity and threat protection capabilities, their ability to drive gamer engagement and revenue per user, and their ability to create intelligence systems in end-to-end business processes
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