Microsoft (NASDAQ:) touts a year-to-date price increase of 37.6%, but I remain bullish on the stock. Its forward GAAP P/E is still only 34.2. 

Microsoft is the No. 1 company engaged in the $533-billion software industry. Microsoft 365, a software productivity suite, has 300 million subscribers.

There are more than 1.3 billion active Windows 10 devices. The dominance of Microsoft’s operating system, and office productivity suite, is why MSFT might rise again before 2021 is over. (See Microsoft stock charts on TipRanks) 

Microsoft Office 2021 Is Here 

The most compelling investment quality of Microsoft is its enduring leadership in on-site and cloud business software. The upcoming October 5 release of Microsoft Office 2021 could boost Q2 FY2022 numbers. 

People who want to buy software products for a lifetime, but only one time, this latest Office suite will be of interest.  

The TPM 2.0-only Windows 11 update on October 5 is free. Microsoft 2021’s download/boxed versions will cost $150 to $250.

Selling lifetime licenses for Office 2021 allows Microsoft to serve people and businesses who don’t subscribe to Microsoft 365. Take note, there are 1.3 billion Windows 10 users, but only 300 million paying subscribers of Office 365. 

Windows 365 Is a New Catalyst

Computers that aren’t TPM 2.0-compliant cannot get the free upgrade to Windows 11. You can rent Windows 365 rather than buying new TPM2.0-equipped hardware computers.

The $31/month Windows 10 version of Windows 365 is reasonable. The cloud PC instance has pre-installed Word, Excel, PowerPoint, Teams, and Outlook.

Going forward, Windows 365 could add $3 to $5 billion in new annual revenue for Microsoft. This estimate could go higher if Windows 365 becomes available to regular Windows customers.  

Microsoft Is Undervalued 

Microsoft’s stock has cheaper valuation ratios than its Software-as-a-Service peers. MSFT only has a TTM P/E ratio of 37.1x. This is lower than Adobe’s (NASDAQ:), 48.4x for Autodesk, Salesforce (NYSE:) 103.8x.  

(Source: Motek Moyen) 

The lower appraisal of MSFT is unjust. Microsoft touts a net income margin of 36.5%. Salesforce’s net income margin is only 10%. The TTM net income of Microsoft is $61.3 billion, much higher than Salesforce’s $2.35 billion. 

The Piotroski F score of MSFT is 8. This means that the company is financially strong and offers excellent value.

Wall Street’s Take 

The consensus among Wall Street analysts is that Microsoft is a Strong Buy, based on 23 unanimous Buy ratings. The average MSFT price target is $334.55, implying 11.7% upside potential.

Conclusion 

The relative undervaluation of Microsof makes it an intriguing investment, as its dominant operating system and office productivity suite practically guarantee its long-term prosperity.

Disclosure: Motek Moyen had no position at the time this article was published.

​Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates, and should be considered for informational purposes only. TipRanks does not warrant the accuracy, reliability or completeness of this information. The article does not constitute a solicitation or recommendation to buy or sell securities. The article does not provide legal, financial, investment, or professional advice. It also doesn’t take into consideration the individual needs or requirements. Neither is the information contained in it a complete or comprehensive statement about the subject or issues discussed. TipRanks, its affiliates, disclaim any liability or responsibility in relation to the article’s content. You are responsible for your actions based upon the articles. TipRanks’ or any affiliates does not endorse this article or make it a recommendation. The past performance of TipRanks or its affiliates is not an indication of future prices, results, or performances.