What’s the Future of Microsoft’s Stock?

Although Apple Inc. (NASDAQ:AAPL) makes headlines on a daily basis and surged 48 percent in the first quarter, Microsoft Corp. (NASDAQ:MSFT) also had an impressive quarter. After remaining dormant for more than a decade, shares jumped 24 percent in the first quarter. Why? The forgotten tech giant created buzz around its new Windows 8 after Wells Fargo (NYSE:WFC) said the new product should help the company hold its existing market share and possibly appeal to some tablet users. After reviewing MSFT’s Consumer Preview, Computer World explained, “Windows 8 Consumer Preview is one of the biggest changes that Microsoft has made to Windows, moving it from an operating system aimed at a single class of hardware (PCs and laptops) to one that spans a wide range of devices, including desktops, laptops, tablets and smartphones.”

Microsoft’s Xbox 360 has also been providing shares with a boost of momentum. The company announced last month that it sold 426,000 units in February, outpacing every competitor. February was the 14th consecutive month that the Xbox 360 was the best selling gaming console in the United States. In comparison, Microsoft sold 270,000 units in January, representing 49 percent of the console market for the month.

In addition to the promise that Windows 8 offers, the current and future success of the Xbox 360 paints a positive picture for the company’s product pipeline. As long time Wall St. Cheat Sheet readers know, a ‘High Quality Product Pipeline for Future Good News’ is the first ‘H’ in our CHEAT SHEET investing framework. Popular games for Xbox will be coming out this year, including new additions to the Halo and Fable series, and the eagerly-awaited Kinect Star Wars, which launched on Tuesday. Also, a new Xbox console, known at this point as the Xbox 720, is expected to be released before the end of next year and come equipped with a Blu-ray player.

Despite the ups and downs in Microsoft shares over the years, we identified Microsoft as a low-risk, high reward investment opportunity in our Wall St. Cheat Sheet Premium Newsletter before its 24 percent breakout. We placed a profit target on shares at $31.50, which was successfully achieved in February. Since then, shares have been struggling to stay above $32. With UBS (NYSE:UBS) issuing a note earlier this week stating that Microsoft’s earnings growth rate will double in 2013, there is still long-term upside potential in shares … but how much? If you would like to receive professional analysis on equities such as Microsoft and other high performers, we invite you to try our premium service free for 14 days.

To contact the reporter on this story: Eric McWhinnie at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com