Key Points
A few days ago, Microsoft (NASDAQ: MSFT) stock dropped to a 52-week low of about $353. While the stock has rebounded from that level, it’s still at a fairly low price point compared to where it has traded over the past year. For the latter half of 2025, Microsoft’s stock was in the low- to mid-$500 range, giving investors a major investment opportunity if it can return to all-time highs in the near future.
If you’re a long-term investor, I think Microsoft represents one of the most compelling investment opportunities in the entire market. It’s well-positioned and cheaply priced, making it a no-brainer buy right now.
Microsoft is now cheaper than the broader market
Microsoft hardly needs an introduction as a business, as it’s a sprawling company that is heavily involved in the tech world. The biggest focus the market has is its artificial intelligence (AI) strategy, which appears to be working out.
Microsoft’s strategy is two-fold. First, it’s integrating AI tools into its existing business productivity software via Copilot. Second, it is operating a neutral cloud computing platform that offers multiple generative AI models to use in applications. Its AI business grew its annual recurring revenue at a 123% pace to $37 billion during its latest quarter, and its cloud computing division grew at a 40% pace. Both of those data points make it seem like Microsoft’s AI strategy is working out exactly as planned, but the stock market isn’t buying what Microsoft is selling.
With Microsoft’s major downturn, it now trades for a cheap price tag from a forward earnings perspective.
MSFT PE Ratio (Forward) data by YCharts.
At 19.3 times forward earnings, it’s cheaper than the S&P 500, which trades for 21.5. Microsoft has a great track record of strong execution and is growing at a faster-than-market pace, so this discount doesn’t seem to make a ton of sense, and conveys that the stock is undervalued.
Another valuation metric I like to use when assessing AI hyperscalers like Microsoft compared to historical levels is the price-to-cash from operations ratio. This looks at how much cash Microsoft is generating and values it versus its market capitalization. From this standpoint, it has been nearly a decade since Microsoft was this cheap.
MSFT Price to CFO Per Share (TTM) data by YCharts.
That tells me that the market is drastically mispricing Microsoft’s stock, and now is the perfect time to buy shares.
Should you buy stock in Microsoft right now?
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Keithen Drury has positions in Microsoft. The Motley Fool has positions in and recommends Microsoft. The Motley Fool has a disclosure policy.
