Is Microsoft Still a Buy? How Much $1K Could Earn in 5 Years
Investors looking for solid opportunities with well-known companies may feel a bit hesitant in putting money into Microsoft stock.
As MarketWatch noted, the company’s stock had a rocky June and has been heading toward one of its worst annual performances. Still, Yahoo Finance and other media outlets reported many analysts remain optimistic about Microsoft stock’s long-term potential. Part of the positive outlook is due to the fact that the company's business fundamentals are generally considered strong.
Find Out: How Investing a Little Each Paycheck Builds Wealth
Consider This: 8 Low-Effort Ways to Make Passive Income (You Can Start This Week)
With all of that in mind, here’s what some financial pros told MoneyLion investors they need to keep in mind about putting $1,000 into Microsoft stock now and looking ahead to the next five years.
Why There’s Reason for Optimism
This could be a good time to invest, as many believe Microsoft stock is priced below its value now, according to Melanie Musson, a finance expert with Quote.com.
“When stock is priced below value, you’re basically getting a deal because the price should catch up to the value,” she added. “And then, if the value continues to increase, you can experience the reward of that growth. Microsoft could be poised for rapid growth followed by long-term, consistently steady, but slower growth.”
What To Expect in the Next 5 Years
Microsoft's been trading around $380 a share after a rough year, down close to 20% from its highs.
“If you'd put $1,000 into Microsoft five years ago, dividends included, you'd have around $1,800 today, since the stock's actual five-year return lands near 75% to 80%,” said Andrew Lokenauth, founder of the blog Fluent in Finance. “Stretch the math using Microsoft's longer 10-year pace instead, closer to 20% a year compounded, and that same $1,000 could grow toward $2,400 to $2,500 over the next five years.”
Lokenauth noted he leans toward the higher end of that range.
“Microsoft's pouring close to $190 billion into artificial intelligence infrastructure this year alone, and Azure keeps taking share from AWS and Google Cloud,” he said. “I spent enough years in corporate development to know that kind of capital spending only happens when a company sees real demand ahead, not hope.”
Lokenauth and other experts who talked to MoneyLion noted that past returns don't guarantee future ones, and said a company this large can't keep growing at a 25% clip forever.
“While any projection based on prior performance is a fairy tale, not a prediction, a decade of good returns tells you what has been, but not what will be,” noted Cody Schuiteboer, president and CEO of Best Interest Financial. “Historical results are not the same as money in the bank.”
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
More From MoneyLion: