Microsoft Corp. (MSFT), an undervalued stock with strong business predictability (closing price $25.25). Part 2

Continued from Part 1 Microsoft Corp. (MSFT), an undervalued stock with strong business predictability (closing price $25.25). Part 1

Forward looking earnings guidance provided by management for FY12

i) Its largest revenue and operating profit segment, Microsoft Business Division transactional revenue likely lag overall PC market. However, multi-year licensing revenue should grow low double digits.

ii) Its second largest revenue and operating profit segment, Windows and Windows Live transactional revenue in emerging market growth significantly outpacing developed market growth. Business PC growth to outpace consumer PC growth, as business refresh continues. We opined that many of the business and personal usage of Windows XP will likely to fully convert to Windows 7 due to the old cycle attrition.

iii) Its third largest revenue and operating profit segment, Server and Tools transactional revenue to track with the hardware market. Multiyear licensing revenue and enterprise services revenue to grow low double digits.

Read more here Microsoft Corp. (MSFT), an undervalued stock with strong business predictability (closing price $25.25). Part 2

Microsoft Corp. (MSFT), an undervalued stock with strong business predictability (closing price $25.25). Part 1

Preamble: Technical analysis

Microsoft (MSFT) certainly looks like a dividend play, with its range bound prices at the lows of $15 in March 2009 to its climax of $37+ in May 2007, ex dividend yield and share buybacks, and withstood the slings and arrows of outrageous fortune (2000: Dot-com boom and bust; 2001: 9/11 attacks on World Trade Center and 2007: Subprime mortgage crisis).

These are the top 11 mutual/hedge fund gurus which have more than 12 million shares outstanding as at June 30^th filing, bearing in mind they are not reflective of a fund’s entire portfolio. Hedge funds may have hedged their positions with derivatives/short other capital structure as an arbitrage play. A cursory glance at Gurus’ latest trades revealed that investors currently have the opportunity to buy the stock at a slightly higher price ($25.25 at the time of this writing) than smart money ie Einhorn, Klarman and Yacktman’s average trade price of $25.04.

Read more here Microsoft Corp. (MSFT), an undervalued stock with strong business predictability (closing price $25.25). Part 1