Buy MSFT Stock At $460?

Microsoft (NASDAQ:MSFT) stock has experienced a notable increase of 16% over the last month, surpassing the S&P 500’s 6% rise. This growth is primarily attributed to Microsoft’s impressive Q1 earnings exceeding expectations and a positive outlook, bolstered by its dominance in cloud computing and AI, especially with significant Azure growth.

However, following its recent ascent, is MSFT stock still worth buying? Yes, we believe that MSFT stock, which is currently priced around $460, offers an appealing buying opportunity. Though its present valuation is elevated compared to the benchmark index, making it susceptible to negative events, we do not see any significant reasons for concern. Our assessment stems from a thorough evaluation of Microsoft’s present valuation relative to its historical operational performance and financial condition. We have examined Microsoft against key criteria: Growth, Profitability, Financial Stability, and Downturn Resilience. This evaluation indicates a robust operational performance and financial status, which we will explain in more detail below.

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How Does Microsoft’s Valuation Compare to The S&P 500?

Based on the price you pay per dollar of sales or profit, MSFT stock appears overpriced in relation to the broader market.

• Microsoft has a price-to-sales (P/S) ratio of 12.6 compared to a figure of 3.0 for the S&P 500
• Furthermore, the company’s price-to-free cash flow (P/FCF) ratio is 26.0 in contrast to 20.5 for the S&P 500
• Additionally, it has a price-to-earnings (P/E) ratio of 35.1 versus the benchmark’s 26.4

How Have Microsoft’s Revenues Increased Over Recent Years?

Microsoft’s Revenues have experienced significant growth in recent years.

• Over the past 3 years, Microsoft has seen its top line increase at an average rate of 12.0% (compared to an increase of 5.5% for the S&P 500)
• Its revenues have risen 14.1% from $228 Billion to $262 Billion in the previous 12 months (compared to a growth of 5.5% for the S&P 500)
• Moreover, its quarterly revenues increased 13.3% to $70 Billion in the most recent quarter from $62 Billion a year prior (as opposed to a 4.8% improvement for the S&P 500)

How Profitable Is Microsoft?

Microsoft’s profit margins are significantly higher than those of most companies in the Trefis coverage universe.

• Microsoft’s Operating Income over the last four quarters was $122 Billion, representing a substantially high Operating Margin of 45.2% (compared to 13.2% for the S&P 500)
• Microsoft’s Operating Cash Flow (OCF) during this time was $131 Billion, indicating a remarkably high OCF Margin of 48.4% (compared to 14.9% for the S&P 500)
• For the most recent four-quarter period, Microsoft’s Net Income was $97 Billion – signifying a remarkably high Net Income Margin of 35.8% (compared to 11.6% for the S&P 500)

Does Microsoft Appear Financially Stable?

Microsoft’s financial position is very solid.

• At the conclusion of the most recent quarter, Microsoft’s Debt was $61 Billion, while its market capitalization stands at $3.4 Trillion (as of 5/29/2025). This results in a very strong Debt-to-Equity Ratio of 1.8% (compared to 19.9% for the S&P 500). [Note: A low Debt-to-Equity Ratio is preferable]
• Cash (including cash equivalents) constitutes $80 Billion of Microsoft’s total assets totaling $563 Billion. This yields a strong Cash-to-Assets Ratio of 14.2% (in contrast to 13.8% for the S&P 500)

How Resilient Is MSFT Stock During A Downturn?

MSFT stock has experienced an impact that was slightly more favorable than the benchmark S&P 500 index during some recent downturns. Concerned about how a market crash might affect MSFT stock? Our dashboard How Low Can Microsoft Stock Go In A Market Crash? provides a comprehensive analysis of how the stock fared during and after previous market crashes.

Inflation Shock (2022)

• MSFT stock declined 37.6% from a peak of $343.11 on 19 November 2021 to $214.25 on 3 November 2022, as opposed to a peak-to-trough drop of 25.4% for the S&P 500
• The stock completely recovered to its previous peak by 15 June 2023
• Since then, the stock has risen to a high of $467.56 on 7 July 2024 and currently trades at about $460

COVID-19 Pandemic (2020)

• MSFT stock experienced a downturn of 28.2% from a high of $188.70 on 10 February 2020 to $135.42 on 16 March 2020, compared to a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 9 June 2020

Global Financial Crisis (2008)

• MSFT stock fell 59.1% from a high of $37.06 on 1 November 2007 to $15.15 on 9 March 2009, versus a peak-to-trough decline of 56.8% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 6 November 2013

Bringing Everything Together: What It Means For MSFT Stock

In conclusion, Microsoft’s performance across the evaluated criteria is as follows:

• Growth: Very Strong
• Profitability: Extremely Strong
• Financial Stability: Extremely Strong
• Downturn Resilience: Neutral
• Overall: Very Strong

Microsoft has showcased strong performance in key financial metrics. Although its current valuation seems elevated compared to the broader market, it is consistent with Microsoft’s own historical performance. For example, the current price-to-sales (P/S) ratio of 12.6x aligns with its 12.4x average over the past four years. Similarly, the price-to-earnings (P/E) ratio of 35x is in line with the stock’s average P/E during the same timeframe.

Looking forward, significant growth in Azure is expected to fuel further increases in valuation multiples. The company’s revenue growth over the next three years is projected to average in the low double-digits, compared to a 12% average over the preceding three years. Overall, despite its recent increases, we believe MSFT stock continues to be an attractive buy at current levels. In fact, we estimate Microsoft’s valuation to be $535 per share, indicating over 15% upside potential.

Nevertheless, it is vital to recognize potential risks. A downturn in economic growth or a recession could result in decreased corporate investments in infrastructure, potentially affecting Microsoft’s revenue growth. Even though MSFT stock has historically performed better than the benchmark index during economic downturns, a decline in its stock price during such situations cannot be dismissed.

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