Will Microsoft’s Stock Continue To Trend Lower?

With shares of Microsoft (NASDAQ:MSFT) trading at around $27.36, is MSFT a Buy, a Wait and See, or a Stay Away? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

Despite having sold 40 million copies of Windows 8 in one month, Microsoft’s stock has seen a moderate decline in that timeframe. Keep in mind there are 300 million people in America. Therefore, 40 million sales in one month is massive. However, that’s Microsoft. This is a company that continuously can’t get out of its own way when it comes to its stock. Every time there’s a spike, it comes right back down a few months later. What’s the reason behind this?

As simple as it sounds, CEO Steve Ballmer might be the problem. He’s a brilliant man, but he’s not brilliant in a Steve Jobs or Bill Gates kind of way. He’s best known for his strange antics and embarrassing motivational speeches, but what is more important is the stock’s performance since he took over as CEO in 2000. Since that time, there has been no appreciation whatsoever.

On the positive side, Microsoft offers a 3.40% yield and a solid business, which makes the stock slightly attractive and keeps it buoyed.

E = Debt to Equity Ratio is Low

Microsoft has a debt-to-equity ratio of .17, which is low. Microsoft’s main competitor, Google (NASDAQ:GOOG), has a debt-to-equity ratio of .09. Microsoft’s numbers are impressive in almost every area, but they’re not as impressive as Google’s numbers in any area, including cash vs. debt.

Microsoft has $66.64 billion in cash and $11.95 in debt. Google has $45.72 in cash and $2.99 billion in debt. However, these numbers aren’t important since both situations are healthy. This is just to point out that Google dominates this competition, which has even led to some poor sportsmanship on Microsoft’s part. We will cover that below…