Microsoft sell-off creates rare value opportunity
The bull case argues that Microsoft's 35% stock sell-off to a forward P/E of 20x is an overblown reaction to minor cloud growth misses, masking exceptionally strong underlying fundamentals.
The argument
The hosts noted that despite a sharp post-earnings drop, Microsoft grew revenue by 17% and earnings by 60% on a massive $350 billion base. They argued that the market's disappointment over Azure growing 39% instead of 40% represents a classic overreaction, drawing parallels to a previously successful investment in Alphabet.
The thesis, stress-tested
✓ What validates it
- ✓Azure growth reaccelerating above 40%
- ✓Stabilization or reduction in CapEx intensity in upcoming quarters
▸ Risks discussed
- ▸Massive CapEx investments yielding lower rates of return
- ▸Short-term capacity overbuilding in cloud infrastructure
Hear it yourself
"It's a great business and it has been a great business at that time, but I think it was temporarily kind of misunderstood by the market. And that's also why we wanted to buy the stock back then. And since then, it has performed incredibly well for us. So we kind of did what all value investors would do. And, yeah, I think those are the situations we look for. And, you know, when I saw some tweets about Microsoft and also the general multiples it's trading at, I felt like it has to be a company that we cover. And by the way, we just came back from Omaha, and it just came to my mind because I got a couple of questions on Microsoft AI and also SAS in general when I was there."
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