Following Microsoft’s $26.2 billion acquisition of LinkedIn, one analyst thinks the Redmond tech giant is on pace to become the first tech company to reach a market value of $1 trillion. This, despite the fact that the Redmond-based giant’s market value currently trails both Apple and Alphabet.
Back in February 2015, the market capitalization of Apple (share price multiplied by number of shares outstanding) surpassed $710 billion. At that point, Apple was the first company in history to be valued at over $700 billion.
The tech titan eventually peaked at $775 billion before slipping back to the current value of $617 billion due to lack of a popular product. Alphabet, Google’s parent company, currently sits at an evaluation of $548 billion while Microsoft is behind both, at $492 billion.
The current valuation of the top five publicly traded tech firms includes:
- Apple $617 billion
- Alphabet $548 billion
- Microsoft $492 billion
- Amazon $359 billion
- Facebook $333 billion
However, analyst Michael Markowski of Equities.com is bullish on Microsoft’s potential for growth in the coming years. He says, Apple being a hardware company has narrow scope to reach more customers compared to Microsoft which being a Software company has a wider scope of reaching 1 billion people and has better cash flow and higher margins.
But this isn’t Markowski’s major reasoning, its LinkedIn. According to Markowski, LinkedIn not only gives Microsoft a leg in the business social media sphere, but also puts the company a unique position to leverage the burgeoning crowdfunding market — an area Markowski sees as the next big avenue of growth on the internet.
Microsoft acquired the social network by paying $26.2 billion and social network companies are traditionally valued higher despite lower margins. Microsoft paid only $60 per user who tends to be a professional with a higher paying job than the typical social media user, compared to Facebook’s $218 per user.
Microsoft’s only competition appears to be Alphabet/Google. Both Microsoft and Google have more than double the annual cash flow of Amazon and Facebook. The analyst doesn’t expect Apple to be involved in what he sees as a two company race.
After a period of hibernation in the leadership of Steve Balmer, Microsoft has gained a huge momentum in the leadership of Satya Nadella and it is obvious Microsoft is moving in the right direction as it is no more the company associated with Windows 8 and Windows Vista, but the company associated with the Surface Book or the Holo Lens and whatever new arenas the company decides to explore in the coming years could well propel Microsoft towards Markowski’s predictions.
Are you as optimistic about Microsoft?
Source : Equities.com