Microsoft’s generative AI prospects are impressive. But the stock has much more to offer investors than new technology. Jim Cramer said Microsoft stock could bottom Wednesday, and of all the megacap tech stocks, this Club name is the one to buy. Microsoft closed at an all-time high of $467 on July 5. But then, almost immediately, it began to slide. It got no help from its July 30 earnings report and hit a recent low in the market crash of Aug. 5. The stock’s subsequent recovery stalled late last month and it fell again. Exacerbated by Tuesday’s tech bust, shares on Wednesday are back where they were on Aug. 2 at $408 apiece. MSFT YTD Mountain Microsoft YTD Wells Fargo is more aligned with Jim, pointing to three “undervalued levers” (search, cybersecurity and enterprise software) that could contribute to Microsoft’s overall revenue growth. Analysts added the stock to their “Signature Picks” list, maintaining an overweight-equivalent-buy rating and a $515 price target. The Club has a $500 price target on the stock. Microsoft’s Bing search engine could grab a bigger share of the search market from Alphabet, Wells Fargo said in a research note Wednesday, citing last month’s loss in an antitrust case involving exclusivity deals with device makers like Apple. If Google Search is no longer the iPhone’s default search engine, then more business could come to Microsoft. To be sure, search is small at Microsoft compared to Alphabet. Google Search has about 88% market share in the U.S., versus just over 7% for Bing, according to web data provider StatCounter. The numbers around the world are even more skewed in Google’s favor. Wells Fargo also highlighted Microsoft’s cybersecurity business. “Microsoft has quietly become the largest cybersecurity vendor on the planet, while continuing to gain share in adjacent areas,” analysts wrote. Similar to others in the industry, Microsoft’s cybersecurity business could continue to win over large companies as customers, as the threat of cyberattacks and breaches remains high. Microsoft faced criticism when its CrowdStrike update in July caused a major global IT outage. In 2023, Microsoft CEO Satya Nadella said the company’s cybersecurity business had surpassed $20 billion in revenue over a 12-month period. Microsoft’s customer relationship software suite, called Dynamics, could also see further upside, Wells Fargo said. Analysts see “significant cross-selling potential.” That’s because the company already has a huge customer base from its Azure cloud computing business and the productivity apps included in Office. Bottom Line These three undervalued areas are encouraging, though Microsoft’s efforts in generative AI are still central to the Club’s investment thesis. While Azure revenue missed expectations last quarter, we still expect a rebound in the second half of the year given management’s bullish comments on its outlook. Wall Street firms seem to agree with us. In addition to Wells Fargo’s optimism, Piper Sandler added Microsoft to its high-conviction buy list on Wednesday due to these AI tailwinds. (Jim Cramer’s Charitable Trust is long MSFT, GOOGL, AAPL, NVDA. For a full list of stocks, see here.) As a subscriber to CNBC Investing Club with Jim Cramer, you’ll receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his Charitable Trust’s portfolio. If Jim discussed a stock on CNBC TV, wait 72 hours after the trade alert was issued before executing the trade. THE FOREGOING INFORMATION ABOUT THE INVESTING CLUB IS SUBJECT TO OUR TERMS AND CONDITIONS AND OUR PRIVACY POLICY, ALONG WITH OUR DISCLAIMER. NO FIDUCIARY OBLIGATION OR DUTY EXISTS OR IS CREATED BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC RESULTS OR PROFITS ARE GUARANTEED.
Amid the recent downturn in tech stocks, financial expert Jim Cramer has highlighted one particular megacap company as a prime buying opportunity. According to Cramer, the company's stock is significantly undervalued, making it an attractive investment during the current market turmoil.
The tech giant in question, known for its strong generative AI initiatives, presents a compelling case for investors that goes beyond its technology innovations. Cramer points out that the company's comprehensive growth strategy and strong market fundamentals position it well for potential recovery and success despite the broader tech industry's struggles.
This recommendation comes at a time when many investors are looking for stable, value stocks amid widespread fluctuations. Cramer's insights are particularly noteworthy, focusing on the company's resilience and potential for long-term value creation, which could be helpful for those looking to diversify their investment portfolios in uncertain times.
Investors and market observers are now closely monitoring this stock, along with Cramer’s other recommendations, as they recalibrate their strategies to navigate the volatile tech landscape.
