Is Microsoft (MSFT) recession resistant?

Recession and bear market hysteria are gripping the media and the popular imagination. Consequently, value hunters are wondering if it is time to potentially recession-resistant stocks such as Microsoft (MSFT).

To explain, some people believe cash-rich dividend stocks, such as Microsoft (NASDAQ: MSFT) will thrive during the collapse. Microsoft is cash-rich, it had $104.693 billion in cash and short-term investments on 31 March 2022.

Similarly, Microsoft reported a quarterly operating cash flow of $25.386 billion on 31 March 2021. Conversely, Microsoft had a quarterly ending cash flow of -$8.106 billion on 31 March 2022.

Appealingly, Microsoft management has scheduled eight 62₵ quarterly dividends between 17 August 2022 and 24 May 2024. Overall, Microsoft shares delivered a forward dividend of $2.48 and a forward dividend yield of 0.97% on 22 June 2022.

Is Microsoft a Recession Resistant Company?

Hence, many people will consider Microsoft (MSFT) recession proof. People will consider Microsoft recession-resistant because it makes enormous amounts of money.

For example, Microsoft reported quarterly revenues of $49.360 billion, a quarterly gross profit of $33.745 billion, and a quarterly operating income of $20.364 billion on 31 March 2022. Yet Microsoft makes less money.

For instance, the quarterly revenues fell from $51.728 billion on 31 December 2021. The quarterly gross profit fell from $34.768 billion on 31 December 2021 and the quarterly operating income fell from $22.247 billion on 31 December 2021.

In the past year, the quarterly revenues rose from $41.706 billion on 31 March 2021. The quarterly gross profit rose from $28.661 billion on 31 March 2021 and the quarterly operating income rose from $17.048 billion on 31 March 2021.

I think Microsoft makes enough money to prosper in a recession.

Is Microsoft (MSFT) a Value Investment?

Many will wonder if Microsoft Inc. (NASDAQ: MSFT) is a value investment because its value is growing while the share price falls.

For example, Mr. Market paid $253 for Microsoft on 21 June 2021. Microsoft’s share price rose to a $342.54 on 10 December 2021. The share price fell to $253.13 on 22 June 2022.

In comparison, Microsoft’s Total Assets grew from $308.879 billion on 31 March 2021 to $344.607 billion on 31 March 2022. Microsoft is gaining value and increasing its money making capacity as its share price falls. Additionally, Microsoft has a growing ecosystem that makes money.

What Value does Microsoft Offer?

Microsoft (MSFT) controls a growing ecosystem that makes money.

For example, Microsoft’s GitHub subsidiary claims to serve over 83 million developers, over four million organizations, and 90% of the Fortune 100. GitHub stores software in over 200 million repertories on what Microsoft calls the largest development platform in the world.

Meanwhile, Microsoft’s LinkedIn social media platform had 66.8 million users in the United States in 2022, Statista estimates. The number of American LinkedIn users grew from 64.7 million in 2021 and 53.8 million in 2018. In contrast, LinkedIn had 828.1 million users worldwide in April 2022, Datareportal estimates.

Impressively, Microsoft Windows is the world’s most popular desktop operating system. Statcounter estimates, Windows had 75.54% of the global desktop operating system market in May 2022.

Finally, Microsoft is a major playing in gaming through Xbox. I could not locate current Xbox Live statistics, but Statista estimates Xbox Live had 100 million monthly active users (MAU) in December 2020.

Why Microsoft could be recession resistant?

Hence, Microsoft operates several enormous platforms that are growing. Those platforms generate enormous amounts of cash that could make Microsoft recession proof.

To explain, Microsoft could generate enormous amounts of float from subscriptions. For example, Xbox Live subscriptions and LinkedIn Premium. To elaborate, LinkedIn Premium offers access to exclusive content such as 16,000 expert-led courses. LinkedIn Premium costs $79.99 a month or $959.88 a year.

Appealingly, those platforms are growing. For instance, Stockrow estimates Microsoft’s revenues grew by 18.35% in the quarter ending on 31 March 2022. Moreover, Stockrow credits Microsoft with seven straight quarters of double-digit revenue growth ending on 31 March 2022.

If you want a growing dividend stock that is recession-resistant and cash-rich. I think Microsoft (MSFT) is worth examining.

 Originally published at https://marketmadhouse.com on June 22, 2022.