One sign of a good company is its ability to take advantage of mistakes committed by others. And that’s why opportunity is shining on Microsoft (NASDAQ:MSFT) stock these days.
It’s true — I can’t say enough about Microsoft stock right now because it’s hitting on all cylinders. I’ve already told you how Microsoft will outlast the pandemic, and why I singled it out as one to buy after this seismic market shift.
Now Bill Gates’ mega-company is stepping up where Zoom (NASDAQ:ZM) is taking a big hit.
It just goes to show how hard it is for an upstart like Zoom to play with the big boys.
Zoom Gives Microsoft Stock an Opening
First, let’s look at what’s happening with Zoom, the remote conferencing company based in San Jose, California.
Zoom has been around since 2011, but many people discovered it for the first time as the novel coronavirus made social distancing a requirement and online meetings became more common.
But the company’s privacy and security isn’t up to par and hackers had a field day disrupting meetings with threats, homophobic and racist messages or by showing pornographic images, according to The Associated Press:
- An online class in Georgia was hacked by someone who “showed pornography to students and the teacher.”
- A sermon by Boston’s First Baptist Church was interrupted by someone shouting “homophobic and racist comments.”
- A Duke University graduate student defending her dissertation was interrupted by echoes, loud music and threats of violence.
- School officials in New York City and Las Vegas issued orders to teachers to stop using Zoom altogether.
And that’s just to name a few.
Zoom, in response, blames the attacks on “party crashers,” a cute term that dramatically understates the seriousness of the problem.
But others are taking it more seriously. The FBI is involved, Congress is asking questions and New York’s attorney general is demanding to know how Zoom protects its users’ privacy.
Zoom is belatedly working on stepping up security.
“We’re always striving to continue to deliver you a secure virtual meeting environment,” the company said in a statement. “Based on feedback from our community, we’ve chosen to enable passwords on your meetings and turn on Waiting Rooms by default starting April 5, as additional security enhancements to protect your privacy.”
But the damage has been done — Zoom fell more than 15% so far in April, and CEO Eric Yuan told the Wall Street Journal that the company is at a crossroads: “If we mess up again, it’s done.”
And that gives Microsoft an opening.
Microsoft Stock’s Opportunity
Microsoft is a longtime leader in online meetings – in fact, it bought one of the first online meeting companies, Skype, back in 2011 for $8.5 billion.
It has about 100 million monthly average users, and 40 million people use Skype per day. The company is also seeing 220% increase in Skype-to-Skype call minutes, which it attributes to the coronavirus pandemic.
On a newly created page on Skype’s website, Microsoft is promoting Skype’s features, which are similar to Zoom’s with better security.
But of course, Skype is a short-term solution. Microsoft is making plans to replace the Skype platform with Microsoft Teams, its own video conference service that also has seen a boost in traffic in recent weeks.
And the company is making sure its users know that Microsoft Teams has the security in place that Zoom had not. Jared Spataro, corporate vice president for Microsoft 365, addressed the security question in a blog post:
“Now more than ever, people need to know that their virtual conversations are private and secure. At Microsoft, privacy and security are never an afterthought. It’s our commitment to you – not only during this challenging time, but always.”
The Bottom Line for Microsoft Stock
With a market cap of more than $1 trillion, a whopping $137 billion in cash and less than $70 billion in debt, Microsoft is an outstanding long-term growth stock that will easily survive the pandemic.
Its recent purchase of Affirmed Networks at a reported value of $1.35 billion shows that Microsoft isn’t afraid to pull the trigger to make a deal happen even in this troubled market.
Microsoft stock is an A-rated stock on my Portfolio Grader.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.