Microsoft: An Overlooked Metric Flashes Cash Flow Conversion Risks (Archive)
Rising working capital quietly undermines Microsoft's strong cash flow conversion.
This 5-Minute Pitch was originally published on Seeking Alpha before the launch of the Hunting Alphas website. It is shared here to showcase my previous work and track record. New 5-Minute Pitches published on this site will not be disseminated anywhere else.
Elevator Pitch
- Despite a lower than expected Azure growth print, the outlook indicators give reasons for optimism as there is strong visibility of Azure commitments over the longer term.
- A sharp rebound in US small business optimism may accelerate sales of Office 365.
- Microsoft's net working capital has been gradually increasing and leading to a worse FCF conversion.
- MSFT stock's premium valuations and revenue guidance misses for Q3 FY25 discourage me from buying now, despite an intact uptrend vs the S&P 500.
- Incremental capex spends are likely to be key indicators to track to inform of the medium-term revenue outlook.
Read the full article here.
Disclosures and Disclaimers
Past performance ≠ future results. Not investment advice. See full Disclaimer.
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