Markets tanking hard today, $DJIA -384. Lackluster earnings reports from $MSFT and $CAT and others, a “surprising” decline in Durable Goods, and low volume from the Blizzard are (mostly) to blame. $AAPL earnings on deck tonight, and the pressure’s ramped up now on the bulls.
Let’s look at the tech world for a minute and do some Revolution Investing analysis. Looking back and looking ahead, you’ll see why I’ve owned Google and Apple for years and why I now own Intel. And why I’m not interested in investing in Microsoft at these levels, even with today’s big sell off.
$MSFT‘s quarterly report was strong in all the wrong areas and weak where it mattered, in Commercial Licenses. Cloud revenue grew 114% year over year though, which is none too shabby. Overall, Wall Street was not impressed today, as $MSFT is down 10% and JPMorgan and other analysts downgraded the stock and lowered their price targets.
Microsoft’s gross margins have gone from 90%+ to the low 60%s over the last fifteen years. Cloud growth at $MSFT is huge, but they are lost in the wilderness and I’m not seeing the new CEO making any screaming strategy changes which is what is needed to fix the long-term model and the gross margins therein.
Intel is also seeing huge growth in the cloud, as their server business is driving topline growth while PCs have peaked again. Intel’s own gross margins have been increasing over the last fifteen years from the 50%s to the 60%s.
Microsoft’s not in a great position to grow their mobile division, as the company has failed and will continue to fail to get developers like Scutify to bother adopting the Windows Mobile standard. Intel has been and continues to invest heavily in mobile and the company could much more easily displace Arm Holdings/Qualcomm inside the smartphones of tomorrow than Microsoft would ever be able to displace Apple’s iOS and Google’s Android.
$AAPL is up 300% since September 2010, when I wrote this article predicting the stock would get to $1000 (pre-split of 7 for 1) back in 2010. “Apple’s Going to $1000 by 2015. Here’s why.” Only 30% more to go.
I’ve also predicted many times over the years that Google will get to $2000 by 2020. Google split their stock into two, which makes my $2000 target only $1000 now. The stock has gone up 200% since September 2010, when I wrote “Google’s headed to $2000 by 2020. Here’s why.”
I always want to invest in dominant tech platforms, which is why I’ve always owned Apple and Google. Intel’s going to continue to dominate in the cloud/server world and any significant traction for Intel in wireless will be gravy on top. Microsoft continues to flounder, despite (because) it can’t even maintain its dominance in the desktop and laptop in a world where Google ChromeBooks and Apple Macs, not to mention tablets, keep taking share in PCs.Contrast that to Intel where it’s not in any threat of losing its dominance to AMD or Arm Holdings in PCs and servers. Microsoft dominance in the server market never existed the way it has for Intel. I’m not interested in buying Microsoft now or anytime near these prices.
Yesterday I asked, “Who’s more scared, the bulls or the bears?” and a majority of the answers was that the bears were more scared. That’s flipped today, I do believe. I’m not pulling any triggers yet, but am scanning my “Watch Lists” for new opportunities into the now panicky sell-off today.