Not too long ago, Microsoft (MSFT) stock's glory days looked to be behind it as sales of desktop PCs slipped into a seemingly irreversible decline amid the consumer shift to mobile technology. Although the dot-com days of the 1990s minted many a "Microsoft millionaire," the aftermath of the tech bust led MSFT stock to trade mostly sideways for more than a decade.
But the past 10 years have been nothing short of a renaissance for the software giant. When CEO Satya Nadella ascended to the top job in 2014, he not only began instituting cultural changes, he transformed Microsoft's core strategy too. Cloud computing and subscription-based services were in; the days of selling software licenses via physical compact disks were passé.
That focus on enterprise customers and – most importantly – Microsoft's shift to selling cloud-based services such as Azure and Office 365 have been an astounding success. Today, Microsoft is a dominant player in cloud computing – and MSFT's stock price proves it.
Indeed, Microsoft stock has been so remunerative since Nadella took over that long-term investors might not even notice that dud decade-plus following the tech bust. Between January 1990 and December 2020, shares in Microsoft, which joined the Dow in 1999 at the height of the dot-com boom, generated a total return of 57,730%. The S&P 500's total return came to a mere 1,950% over the same span.
Along the way, Microsoft stock generated $1.91 trillion in wealth for shareholders, good for an annualized dollar weighted return of 19.2%, according to Hendrik Bessembinder, professor of finance at the W.P. Carey School of Business at Arizona State University.
Only Apple (AAPL) generated more wealth for shareholders over those three decades, making MSFT one of the very best stocks of the past 30 years, per Bessembinder's findings, which account for cash flows in and out of the business and other adjustments.
The bottom line on Microsoft stock
Which brings us to what $1,000 invested in MSFT stock 20 years ago would be worth today.
But first things first. As you can see in the above chart, if you had invested $1,000 in MSFT stock in late April 2003 and sold at its height in November 2021, you would have grossed more than $21,000.
MSFT stock remains about 18% off its all-time closing high, however, shedding roughly $480 billion in market value in the process. To put that enormous sum in perspective, only eight companies in the S&P 500 (Microsoft included) have market capitalizations of more than $500 billion.
As a result, that $1,000 investment made 20 years ago is today worth $17,500. By comparison, the same amount invested in the S&P 500 over the same time frame would theoretically be worth $6,700 today.
Of course, that is still a fabulous return by any measure. Over its entire life as a publicly traded company, MSFT has generated an annualized total return (price change plus dividends) of almost 26%. The S&P 500's total return comes to not quite 10% over the same period.
Microsoft stock: buy, sell or hold?
Perhaps most importantly, Wall Street remains confident that Microsoft stock will continue to beat the market by wide margins going forward. In addition to regularly making the list of hedge funds' top stock picks, MSFT routinely takes the top spot in analysts' rankings of all 30 Dow stocks.
Just have a look at how the Street collectively views MSFT stock. Of the 51 analysts issuing opinions on Microsoft stock tracked by S&P Global Market Intelligence, 32 call it a Strong Buy, 13 say Buy, five have it at Hold and one slaps a rare Strong Sell rating on the name. That works out to a consensus recommendation just shy of Strong Buy.
We'll let a bull – Stifel analyst Brad Reback, who rates MSFT at Buy – summarize the investment thesis on Microsoft shares:
Microsoft has refocused the company around Azure and Office 365, which we view as several large, multi-year secular growth engines that should help drive mid- to high-single-digit Productivity and Business Process growth and low-double-digit Intelligent Cloud growth in coming years. On the More Personal Computing front, while we remain cautious on the Windows franchise, we think areas such as Bing, Surface, and Xbox are gaining scale. Overall, we believe strong commercial cloud revenue and gross margin growth and expense discipline should lead to accelerating operating profit and free cash flow generation in coming quarters. This, coupled with consistent capital return (more than $20 billion in annual buybacks/dividends), should enable Microsoft to post at least high-single-digit total returns (earnings per share growth + dividend yield) in coming years.
With an average price target of $306.97, industry analysts give Microsoft stock implied upside of about 10% in the next 12 months or so. Add in the dividend yield, and the implied total return comes to about 11%.
Should the Street's highest target price of $420 come to pass, MSFT stock would rise about 50% from current levels. On the other hand, the Street's lowest price target – at $212 a share – gives Microsoft stock implied downside of about 25% in the next year or so.
Where Microsoft goes from here remains to be seen. What's not in doubt is that $1,000 invested in MSFT stock 20 years ago turned out to be an absolutely market-crushing deployment of capital.
More Stocks of the Past 20 Years
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- If You'd Put $1,000 Into Apple Stock 20 Years Ago, Here's What You'd Have Today
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If You'd Put $1,000 Into Amazon Stock 20 Years Ago, Here's What You'd Have Today
