Microsoft: nothing wrong with it except the price

This is a quality question with a price answer. Everything the bulls say is true and already in the number.

The mechanism is duration. A multiple is a claim on a terminal growth rate, and at these levels the implied duration is longer than any enterprise software franchise has historically sustained without a re-rating. The comparison is the evidence. Peers with similar growth and margin profiles trade materially lower, and the gap has widened rather than narrowed over the last two quarters without a corresponding change in fundamentals. The position: no call. This is a name I want to own and not at this level, so there is nothing locked here and nothing for the record to grade. If the entry improves I will say so in a piece that does carry a call. Competitive discounting is the risk that would show up first in realised price. A well-funded competitor buying share would compress the exact metric this argument rests on.

Discussion · 3

Sam WhitfieldMAY 30

Good to see an invalidation level actually stated. The distinction between adequate reserves and the earnings path is well made. Interested in what the kill switch looks like in practice.

Noa BergmanMAY 29

This lines up with what I saw in the filings. The installed base argument is stronger than the cycle argument here. How much does this depend on the macro cooperating?

Yael BrennerMAY 29

I hold the other side of this. Splitting volume from price is what makes this legible. Is there a cleaner way to express this than the equity?

PositionNo position

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This is research, not financial advice. Calls lock at publish and are graded by the market; they can be and often are wrong. Do your own research and consider your own circumstances before acting.