Why Microsoft Stock Is Trading At All-Time Highs
Microsoft Stock Rallies After Company Increases Office Subscription Prices For Businesses
Shares of Microsoft gained strong upside momentum and moved above the $300 level after the company announed that it wold change its commercial pricing for Microsoft 365.
According to Microsoft, this is “the first substantive pricing update” since Office 365 was launched a decade ago. The pricing of Microsoft 365 Business Basic will increase from $5 to $6 per user, while the price of Microsoft 365 Business Premium will grow from $20 to $22. Other offerings will see similar price increases. Microsoft has also stated that there were no changes for education and consumer products.
It should be noted that while the price increases look small on a dollar basis, they are material on a percentage basis. For Microsoft 365 Business Basic, the price will grow by as much as 20%. Not surprisingly, the market is happy to see such news.
What’s Next For Microsoft Stock?
It is fairly easy to switch between various Office-like products for an individual consumer who typically needs a limited number of features. Meanwhile, migration from one system to another may be a true nightmare for a big organization.
In this light, Microsoft has great pricing power in the commercial segment. According to the company, Office 365 has more than 300 million commercial paid seats, which means that the recent price increase will have a material impact on Microsoft’s revenues.
Currently, analysts expect that Microsoft will report earnings of $8.76 per share in 2022 and $10.01 per share in 2023, so the stock is trading at about 30 forward P/E.
However, earnings estimates have been moving higher in recent weeks, and they will soon be updated as analysts react to the new announcement. Analysts’ price targets will get updated as well. In this light, Microsoft stock has decent chances to continue its upside move as the company begins to extract more value from existing products.
For a look at all of today’s economic events, check out our economic calendar.