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Microsoft has upside from here, this portfolio manager says

Microsoft (Microsoft Stock Quote, Charts, News, Analysts, Financials NASDAQ:MSFT) has rallied nicely in recent months, but the stock is still well off its highs. Where will it land a year from now? Likely higher, says Kim Bolton, president of Black Swan Dexteritas, who thinks MSFT has too many successful businesses on tap for investors to ignore for long.

“It’s still in our top five [holdings],” said Bolton, speaking on BNN Bloomberg on Wednesday. “There are a lot of interesting moving parts that are going on with Microsoft.”

Bolton pointed to Microsoft’s #2 market position in cloud computing with its Azure product, which he said is now the fastest-growing cloud company in the business, while on the productivity side, Microsoft Teams, Outlook and LinkedIn are all huge assets.

“It’s amazing how many horses they have in this race,” he said. 

And then there’s Microsoft’s plans to buy gaming company Activision Blizzard. First announced last year, the proposed $68.7 billion acquisition would be the largest ever in the gaming sector, but the deal has yet to clear anti-trust regulatory hurdles worldwide, with many countries chiming in on deciding whether to allow the two giants to merge. 

Earlier this week, Japan’s Fair Trade Commission said it would not attempt to block the acquisition, saying it didn’t see a merged company as stifling competition. Last week, UK regulators came to the same conclusion. From the other end, the US Federal Trade Commission came out in December against the deal, saying it is suing Microsoft, which it sees as attempting to stifle competition to its Xbox platform.

But many see the merger as more likely than not, even now a year out from its first announcement. 

“I think it will happen,” said Bolton. “Everyone’s worried about the antitrust monopoly and so on, but it’s still going to make them the third largest gaming company in the world behind China’s Tencent and Sony.”

Now a $2 trillion market cap company, Microsoft shares have climbed from about the $220 mark in November to now around $280. Bolton thinks investors will do well with the stock, especially if they can catch it a few notches lower than its current level.

“I’d buy it here, but if it goes down toward $265 I’d buy some more and then again down at that $250 level,” he said. “It’s had a decent run over the last 100 days and is up 15 per cent. We still like it.”

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