There are plenty of reasons to buy Microsoft
Microsoft has a clean balance sheet with billions in cash on the books, a modest valuation (trading at 12 times earnings vs. a high-teens multiple on the S&P 500), and pays a solid 2.8% dividend. It’s a highly profitable company and the case for buying Microsoft is a strong one — just not because of the Xbox.
While the new Xbox system will likely sell tens of millions of units worldwide, the benefit to Microsoft is negligible. Microsoft is a strong cash-flow generator, but its biggest sources of all that cash do not involve gaming. Put simply, if you’re buying Microsoft, your future returns are much more dependent on the company’s Office software and Windows operating system than on the new Xbox.
As a result, investors hoping the new Xbox console will serve as a new growth engine for Microsoft are likely to be disappointed.
The article Is a New Console Reason Enough to Buy Microsoft? originally appeared on Fool.com and is written by Robert Ciura.
Robert Ciura has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft.
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