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MSFT – Market expectations are for Uniform ROA to expand, but management may have concerns about growth, hybrid work, and gaming opportunities

August 18, 2021

  • Microsoft Corporation (MSFT:USA) currently trades at a historical high relative to UAFRS-based (Uniform) earnings, with a 32.7x Uniform P/E. At these levels, the market is pricing in bullish expectations for the firm, but management may have concerns about revenue growth, the shift to hybrid work, and gaming category opportunities.
  • , management may lack confidence in their ability to sustain revenue growth across industries, customer segments, and geographies outside the US. In addition, they may have concerns about the impact of changes in accounting estimates and the end of COVID-related restrictions on operating income and margin for FY 2022, as well as the pace of the customer shift from on-premise to cloud. Furthermore, management may lack confidence in their ability to power 5G core networks, support the transition to hybrid work, and capitalize on gaming category opportunities. Moreover, management may also lack confidence in their ability to sustain renewals of core contracts and expand the availability of Xbox Cloud Gaming to other countries. Finally, they may be overstating the capabilities of their Windows 11 update, industry adoption of Power Platform solutions, and their opportunities in the creator economy.