Microsoft stock prices prediction 2013, Microsoft price target to buy 2012-2013, Microsoft shares prices 2013, Microsoft market shares 2013 : Facebook is paying Microsoft $550m (£341m) for some of the patents it recently bought from AOL. Microsoft paid more than $1bn for most of AOL's patents, beating rivals reported to have included Facebook. Microsoft bought 925 patents and patent applications from AOL. It is now selling 650 of those patents to Facebook as well as licences to the other 275.Microsoft had a huge surge of cash last quarter and finished the quarter with $56.5 billion of net cash. The quarter was unusual in that accounts receivable declined by some $2.7 billion and this doubtlessly contributed to the $9.3 billion cash buildup. This is a seasonal pattern and Microsoft will not build up cash at this pace going forward. Nevertheless, the company will continue to throw off enormous amounts of cash and it will be interesting to see what combination of buy backs and dividends emerge.
At any rate, I calculated net cash at roughly $6.70 per share resulting in an enterprise price of $25.42. With estimated earnings for this fiscal year at $2.72 and adjusting for interest earnings, Microsoft as a business is actually selling for less than 10 times earnings. I have pounded the table on this issue before and I will pound it again; Microsoft is worth a lot more than 10 times earnings and at the current price it is still a steal.
Looking at 2013, I am assuming calendar year earnings of $3.21. I am also assuming that balance sheet cash increases to $8 a share by the end of 2013 (partly due to lower share count and partly due to higher total balance sheet cash). I will also assume that the dividend is raised to $1.00 a share. My valuation method is to multiply the dividend by 20 (assuming a 5% yield on safe dividends like this one) and to multiply retained earnings by 14.
This results in a valuation of $8 plus $20 plus $30.94, or nearly $60 a share. I am optimistic that the market will "catch on" and start to give Microsoft more credit for balance sheet cash and will also began to reward it with a more realistic multiple.
As to the balance sheet cash, I believe that management will utilize financial engineering in the long term interest of its shareholders if the market lags in assigning it an appropriate multiple. My $50 target actually reflects a substantial discount from what I consider to be a fair price if Microsoft achieves the very attainable targets set forth above. Needless to say, I am strongly bullish on this stock.
Source : http://seekingalpha.com
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