The Strategist

Microsoft's market cap is predicted to soar up to $1 trillion



12/26/2016 - 14:39



American technology company Microsoft has a good chance to get market valuation of $ 1 trillion for the first time, according to Michael Markowski, an analyst at Equities. All the Redmond giant has to do is to double the value of its shares and continue developing professional social network LinkedIn.



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Now, the most valuable company in the world is Apple. In February 2016, volume of Apple's market cap stood at $ 710 billion. Subsequently, the company's value reached $ 775 billion, followed by its market capitalization falling to $ 617 billion.

Alphabet Holding (owned by Internet company Google) with $ 548 billion of market cap is snapping at Apple’s heels. Microsoft with its $ 492 billion holds the third place. However, Markowski sure Microsoft has a good chance to become the world’s first company with a capitalization of more than a trillion dollars.

The expert notes that Microsoft’s business is quite scalable, which enables the company to reach a much wider audience than that of Apple.

Markowski also believes that acquisition of LinkedIn helped Microsoft improve its market valuation due to higher profitability of the social network. The largest software maker in the US agreed to buy social networking site LinkedIn in June for $ 26 billion. To do this, the tech giant issued bonds for $ 19.75 billion with a maturity of seven.

The LinkedIn deal became the biggest acquisition held by current Chief Executive Satya Nadella, who became Microsoft’s CEO in 2014. Acquisition of Skype in May 2011 for $ 8.5 billion occupies the second place in the Redmond giant’s shopping list. Recruitment services provide most of the revenues for LinkedIn. In 2015, the sum amounted to nearly $ 3 billion. At the same time, the company is still unprofitable.

The expert believes that the corporation needs to increase user base of the service in order to achieve capitalization of $ 1 trillion. According to the analyst’s estimates, Microsoft will need to bring 700 million new users in the social network (433 million people are registered there now).

Net profit of US Microsoft Corp., the world's largest software maker, in July-September amounted to $ 4.69 billion, or 60 cents per share, compared with $ 4.902 billion, or 61 cents per share, during the same period of the previous year.

Adjusted earnings, which does not account restructuring costs, amounted to 76 cents per share versus 70 cents a year earlier. Analysts polled by FactSet, on average, forecasted the index at the level of 58 cents per share.

Microsoft's revenue increased by 0.4% to $ 20.453 billion from $ 20.379 billion. Analysts polled by FactSet expected adjusted earnings of 68 cents per share on revenue of $ 21.7 billion on average.

During the last quarter, Microsoft returned $ 6.6 billion to shareholders in the form of dividends and repurchase of own shares. The dividend amount was increased by 8%, to $ 0.39 per share.

source: mspoweruser.com