Market Overview

Microsoft Is A 'Relative Value Bet' Ahead Of Earnings, Pro Says

Microsoft Is A 'Relative Value Bet' Ahead Of Earnings, Pro Says

Momentum is building this earnings season, and investors looking to capitalize on the hot tech sector may consider buying Microsoft Corporation (NASDAQ: MSFT) ahead of its earnings report on Thursday, at least according to Boris Schlossberg, managing director of foreign exchange strategy at BK Asset Management.

One of Microsoft's most notable strengths is its ability to shift the business toward a subscription model, he said during a recent CNBC "Trading Nation" segment. Rather than collecting revenue from customers up front, it has made a "very astute business decision" to capture revenue every year by locking customers into the Office 365 line of products.

Microsoft's strong cash balance also makes the company a "relative value bet" as it remains undervalued versus some of its tech peers.

Heading into the earnings report, analysts are expecting another strong quarter. But even if Microsoft misses consensus estimates or disappoints investors, the company's long-term positive outlook should remain unchanged, he added. In fact, Microsoft's prospects remains "very strong" for, at the very least, the next "several years" as the company isn't finished in changing its business model to maximize revenue wherever possible.

Nevertheless, there are some concerns that can't be ignored, Schlossberg also noted. For instance, there are still many consumers who are hesitant to buy Office 365 on a subscription model. Also, Google (Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL))'s portfolio of office tools is a notable competing product offered for free to consumers.

Related Links:

Breaking Down The Sell-Side's 'Most-Loved' Sectors

Dan Deming's Microsoft Options Trade

Posted-In: BK Asset ManagementCNBC Earnings News Previews Tech Media Trading Ideas Best of Benzinga


Related Articles (GOOG + GOOGL)

View Comments and Join the Discussion!