Is Microsoft Worth $39 Per Share? (MSFT)

In our daily upgrades and downgrades we noted that Microsoft Corporation (NASDAQ: MSFT) was raised to Buy by the research team at Argus this morning.  Frankly, the call feels late because Microsoft has been breaking out on its chart for just about all of 2012 so far.  What is interesting is that the price target is so high: $39.00.

The motive here is Windows 8 launching this year as the operation system that can compete in both the PC and in the tablet markets.  The stock only trades at about 12-times Argus’ current year earnings and less than 11-times next year’s earnings estimates.  The report noted, “We view Microsoft shares as undervalued by historical standards and relative to peers.”

With shares at $32.85, the 52-week trading range is $23.65 to $32.94.  Analysts have been raising the target price on Microsoft and Thomson Reuters now has a consensus price target objective of $33.00 per share.  This $39.00 is at the top of the range of estimates, and the highest target noted by Thomson Reuters is $40.00 on the stock.  Because the share performance has been so strong, Microsoft now yields only 2.4% on its dividend.

If Argus is right on its price target, then there is just over 20% upside left in Microsoft shares if you include its dividend.

JON C. OGG