$5 TRILLION?
Yes…
Microsoft – the company that Bill built – could be on the road to becoming worth DOUBLE what it is now.
That kind of value is unfathomable…
But more and more companies are creeping up into being multi-TRILLION-dollar companies.
Apple (AAPL) was the first…
Followed by Amazon (AMZN)…
After that – trillion-dollar companies became as common as pizza.
However, it seems like $5 trillion will be the next ceiling…
And Microsoft (MSFT) is rocketing toward that number at an amazing rate.
While it’s still behind Apple…
Things could speed up for Bill’s baby to the point where they shoot right by Steve Jobs’ pet project.
Let me show you why…
What might give Microsoft the edge?
Well, it’s because it’s one of the AI’s industry leaders – and has experienced a remarkable surge in its stock prices – which has led to some investor skepticism.
Is Microsoft overvalued?
Well, first, it’s important to understand the market’s expectations…
Currently, Microsoft’s price-to-earnings (P/E) ratio appears high at 32x – which is nearing its 20-year peak from 2021.
However – P/E ratios alone are NOT enough to value growth-focused companies of this magnitude…
We’ve got to dig deeper.
Using a 7.5% discount rate and last year’s cash flow as a starting point…
The market is assuming approximately 10% cash flow growth for the next ten years – followed by a 2.5% growth rate thereafter.
To put this growth rate into perspective – it is important to consider Microsoft’s past performance – as over the past decade, the company has earned an average annual cash flow growth of just over 10%…
This lines up closely with the projected growth rate numbers.
Now, by examining the potential size of the total addressable market (TAM) we get an even clearer picture…
Global IT spending currently amounts to around $4.5 trillion – and if it doubles over the next ten years – Microsoft’s sales could reach $640 billion.
So, even if Microsoft maintains its current market share – this would still imply a significant increase in sales.
Considering the company’s focus on cloud computing and AI – it is reasonable to assume that Microsoft’s growth could match or exceed its current performance.
Taking a different approach…
When forecasting the impact of Microsoft’s products – it becomes clear that substantial growth opportunities exist.
With the potential for groundbreaking AI-infused software to save workers hours per day – the company could find itself saving on productivity.
If Microsoft were to raise prices and retain $5 of the estimated $80 daily savings per worker – this could result in annual revenue of $546 billion – surpassing the company’s current total revenue…
So, when considering Azure and the consumer segment’s potential – Microsoft’s revenue could approach $1 trillion within ten years.
While these analyses involve some degree of speculation – they’re not so out of line that it borders on the fantastical…
Fortunately, the growth rate implied by the market’s valuation does not appear unrealistic.
This alone suggests that Microsoft’s current stock price does not indicate a bubble-like valuation…
At least not yet.
Which means that investor skepticism we talked about earlier – is unwarranted.
However…
It is important to acknowledge the risks in these assumptions.
Microsoft is still exploring the full potential of its AI-infused products…
And there is a possibility of slower adoption or resistance to change among workers.
Additionally, the emergence of unforeseen risks related to AI could impact – or at least change – the company’s trajectory.
But I believe the analysis presented here provides a pretty accurate evaluation of Microsoft’s growth potential and valuation.
While uncertainties remain – the current expectations appear reasonable and do not point to a bubble in Microsoft’s stock price.
As Microsoft continues to innovate in the AI space and capitalize on its market position – it truly does have the potential to become a $5 trillion company in the future.
That doesn’t mean it’s a “buy” at the moment.
If and when they trigger the GorillaTrades trading matrix – members of my service will be the first to know.
And as we all know – the secret to success for investing is timing.
If you want to be sure you get the most bang for your buck – please consider becoming a member today.
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Become a member before our next round of trades is sent out…
Or don’t – the choice is yours.
Regardless, keep your eye on Microsoft – it could be a big winner now…
AND later.
“The advance of technology is based on making it fit in so that you don’t really even notice it, so it’s part of everyday life.” – Bill Gates