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Microsoft: Curious Option after FAANG Sell-Off

Microsoft (MFST) and the rest of the tech trade have really soured in recent weeks.

As technology stocks and FAANG lead the markets lower in this latest market sell-off, investors may have a chance to pounce on the blue-chip behemoth that only seldom goes on sale.

With plenty of growth drivers and little hair to be found in the company’s solid fundamentals, I am bullish on Microsoft stock, even more so as shares approach correction territory. (See Microsoft stock charts on TipRanks)

The company’s growth isn’t about to slow down anytime soon, even if the road ahead is more challenging, with higher rates in the forecast and the easing of COVID-19 tailwinds.

Microsoft’s Growth Engine

Microsoft has so many growth levers that it can pull. Whether we’re talking about its dominant position in the Xbox gaming business, or Azure, it’s clear that there are few dents to be had in Microsoft’s armor.

Despite being an old company, Microsoft has found ways to adapt to maintain its stellar growth rate.

Windows and Microsoft Office subscriptions continue being a major cash cow for Microsoft. That said, both ageless wonders are no longer the same needle movers they once were.

Still, momentum in Microsoft’s higher-growth businesses is more than capable of making up for any slowed momentum in its widely used software offerings.

Over the past three years, Microsoft’s growth has been impressive for a firm its size, with an average annualized revenue growth just north of 15%.

Amid the pandemic, Microsoft has shifted into high gear, posting increased strength across almost every front and making the most of the pandemic-induced bump in enterprise IT spend.

Indeed, it will be tough to derail Microsoft, even as its stock sinks into year-end due to broader market weakness.

Azure Gaining Momentum

The Azure cloud-computing business, in particular, has grown into a force to be reckoned with in recent years. CEO Satya Nadella has done an incredible job of putting Azure on the map, making the name one of the best ways to play the ongoing digital transformation.

In the fiscal fourth quarter, Azure enjoyed an incredible 51% in sales growth, or 45% on a constant-currency basis. Indeed, Azure has the winds to its back in today’s increasingly digitized workplace such that higher rates or slowed economic growth is unlikely to take a significant stride out of Azure’s step.

With a nearly 19% share of the global cloud infrastructure service market, Azure still has room to run despite more than doubling its share in just a few years.

Can Microsoft double its market share again over the next three years? It will be more challenging, but if it can pull it off, the rewards for shareholders could be huge, as it looks to pressure its peers in the public cloud.

Wall Street’s Take

According to TipRanks’ analyst rating consensus, MSFT stock comes in as a Strong Buy. Out of 21 analyst ratings, there are 21 unanimous Buy recommendations.

TheĀ average Microsoft price target is $336.19. Analyst price targets range from a low of $275 per share, to a high of $411 per share.

Bottom Line

A correction in MSFT stock may very well be a gift. Microsoft is firing on all cylinders, doubling down on top growth drivers like Azure.

The froth has been cut off the top of MSFT stock, making it one of the more intriguing FAANG stocks to consider.

Disclosure: Joey Frenette doesn’t own shares of any mentioned companies at the time of publication.

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