Microsoft Moves in as Dow’s Top-Performing Stock

After reporting solid earnings Thursday, Microsoft Corp. (NASDAQ: MSFT) shares rose to a new all-time high Friday and took over as the Dow Jones industrial average’s best-performing stock for the year to date. The stock added 0.8% for the week (1.8% on Friday alone). For the year to date, Microsoft shares have risen by 24.23%.

The second-best performer among the Dow index equities so far this year is Visa Inc. (NYSE: V), which is up 23.65%. That is followed by Nike Inc. (NYSE: NKE), up 23.04%, Boeing Co. (NYSE: BA), up 20.34%, and UnitedHealth Group Inc. (NYSE: UNH), up 14.62%. Of the 30 Dow stocks, half have managed to post a gain to date in 2018.

The blue chip index added just 39 points over the course of the past week to close at 25,058.12, up a scant 0.1% from the previous Friday’s close. The Dow closed up less than 1.0% for the second quarter but down 1.8% for the first six months of 2018.

Before Microsoft reported earnings last week, the company announced that it had signed a five-year deal with Walmart Inc. (NYSE: WMT) to provide the retailer with cloud solutions and services. There are other firms Walmart could have turned to, but the one the company would obviously avoid is Amazon and its Amazon Web Services cloud. Both Microsoft and Walmart compete — in different spaces — with Amazon and, as the saying goes, the enemy of my enemy is my friend.

In its earnings announcement, Microsoft reported its first-ever fiscal year revenue total of more than $100 billion. Microsoft beat both top and bottom line estimates, and gross margins rose to 67% in the fourth fiscal quarter. Commercial cloud revenue jumped 53% year over year, and intelligent cloud revenue rose 23%. Windows OEM revenue rose 7%, and the company now claims 31.4 million subscribers to its Office 365 Consumer subscription base. Revenue growth hit 89% year over year in the company’s Azure platform.

On the conference call, Microsoft guided first-quarter revenue of $27.35 billion to $28.05 billion. The company sees its server products and cloud services revenue growth in the high teens for the 2019 fiscal year. In its productivity and business processes segment, Microsoft forecast double-digit revenue growth.

Microsoft’s shares closed Friday at $106.27, below a new high of $108.20 earlier in the day. The 52-week low is $71.28, and the consensus 12-month price target on the stock is $113.47.

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