The tech giant's stock offers both strong growth and a margin of safety for investors
Despite getting caught up in the global information technology outage that caused chaos around the world, Microsoft (NASDAQ:MSFT) remains one of the best tech stocks that investors can own. Microsoft stock will recover from this latest setback.
The culprit in the worst tech outage to date was cybersecurity firm CrowdStrike (NASDAQ:CRWD). However, the cybersecurity systems from CrowdStrike that are widely used by businesses and governments around the world run on Microsoft computers.
When a bug occurred in one of CrowdStrike’s updates for computers running Microsoft’s Windows operating system it led to what’s being called the biggest information technology outage in history.
For Microsoft’s cloud service customers, the situation led them to see blank screens and error messages. While the situation is by no means a positive for Microsoft, the company appears blameless and any damage to its reputation looks likely to be minimal at best.
The same cannot be said for CrowdStrike. But the IT outage aside, there are still many great reasons to buy Microsoft stock.
A Blue-Chip Tech Stock
Microsoft is often referred to as a blue-chip technology stock. This implies that Microsoft combines both the growth of a megacap technology stock with the safety and reliability of a blue-chip security.
For investors, MSFT stock presents the best of all worlds. This is reflected in Microsoft’s share price, which has risen nearly 30% in the last 12 months and retains a “strong buy” rating among 35 analysts who cover the company.
The median price target on Microsoft stock is 15% higher than where the shares currently trade. MSFT stock also pays a quarterly dividend of 75 cents per share, and it is one of only three companies that has a market capitalization above $3 trillion.
Microsoft is scheduled to report second-quarter financial results on July 30 and they are likely to continue a string of earnings outperformance for the company.
Microsoft’s first-quarter financial results beat Wall Street forecasts across the board, driven by accelerating growth in its Azure cloud-computing business unit.
The company’s overall sales in Q1 were up 17% year-over-year. Similarly strong Q2 results can be expected.
An AI Play
Another reason to be bullish on Microsoft stock is that it remains one of the best ways to play the boom in artificial intelligence.
While the company has announced that it won’t hold an observer seat on OpenAI’s board of directors because of regulatory scrutiny, Microsoft remains heavily invested in the AI tech startup – to the tune of $13 billion.
In recent months, Microsoft has added AI technology to many of its best-known products.
This includes introducing new AI tools for use with the Windows operating system and across its cloud-computing infrastructure.
Microsoft has already reported revenue growth from AI models used with its Azure public cloud, and has introduced Surface personal computers that feature a “Copilot” button for quick access to the company’s AI chatbot.
These features, and others, are keeping Microsoft ahead in the global AI race.
Buy Microsoft Stock
While the global IT outage that just occurred was unfortunate, it should not cause any lasting damage to Microsoft’s reputation or its stock.
Going into Q2 earnings, Microsoft looks extremely strong and likely to announce stellar results that will give its share price a further boost.
That the company remains a leader in the red-hot AI sector is just one more reason for investors to be as bullish as analysts. Microsoft stock is a buy.
On the date of publication, Joel Bagloleheld a long position in MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.
