Microsoft is a great company no doubt.
But it will still be difficult to grow faster than it is now given it's size. There have been studies out that have shown that when a company gets to 20 Billion in sales, it's difficult to grow quickly.
After all. Once you get that much, to grow at 10% you need 2 billion more in sales. And as you get even more sales, it is increasingly difficult to maintain that growth. (This is why those thinking that csco would be a trillion dollar company were being foolish. You can't keep the growth up or you'd have to eventually sell more than the entire gdp and there are only so many people or companes you can sell to).
Getting into new areas will help, but the fact that msft has a large (and will continue to or else sales will be hurt) dependence on pc sales (which will never go away but will not increase significantly in growth RATE) limits the TOTAL growth that msft can see.
That is why smaller companies will outperform the bigger ones but the bigger ones will always have a presence. By their sheer size they can sit on a smaller company and suffocate it. They also have the capital to buy whatever they need.
Will msft's crm product do much harm to sebl? Orcl's hasn't and they give it away. It might have some affect on sebl, but won't mean that much to msft.
Put everything together and yes, msft can still grow. But I still think it will underperform other smaller companies in stock appreciation.
If it were to trade lower, then the stock has more upside, and that's why I would buy it as a trade, but once it gets back to the 68-70+ area, that outperformance goes away again.
There are many companies that once they get to be large remain wonderful companies, but languish in stock appreciation for years due to slowing growth. That isn't to downplay msft or it's market or stature, just a comment on the stock appreciation compared to other stocks.
To get to 100, it needs to have pe expansion. And for me, a company growing at this rate would get that if other smaller companies also saw pe expansion which would mean that the others would outperform even more. |
