Microsoft (NASDAQ:MSFT) stock experienced a decline of over 3% on Monday, March 10, amid a broader Wall Street downturn. This sell-off was triggered by mounting concerns over President Donald Trump’s tariff policy and its wider impact on the economy. This resulted in the Dow Jones falling 2.1%, the S&P 500 dropping 2.7%, and NASDAQ plunging 4.0%, marking its worst day since September 2022. Our take on market crash risk right now has more details on tariffs and its impact on the broader market.
At its current levels of $380, MSFT stock looks attractive but volatile – making it a tricky pick to buy. We believe there is minimal cause for concern with MSFT stock, which makes it attractive but highly sensitive to adverse events as its current valuation is very high.
We arrive at our conclusion by comparing the current valuation of MSFT stock with its operating performance over the recent years as well as its current and historical financial condition. Our analysis of Microsoft along key parameters of Growth, Profitability, Financial Stability, and Downturn Resilience shows that the company has a very strong operating performance and financial condition, as detailed below. However, if you seek upside with less volatility than a single stock, consider the High-Quality portfolio, which has outperformed the S&P 500 and achieved returns greater than 91% since inception.
How does Microsoft’s valuation look vs. the S&P 500?
Going by what you pay per dollar of sales or profit, MSFT stock looks expensive compared to the broader market.
• Microsoft has a price-to-sales (P/S) ratio of 11.3 vs. a figure of 3.2 for the S&P 500
• Additionally, the company’s price-to-operating income (P/EBIT) ratio is 25.1 compared to 24.3 for S&P 500
• And, it has a price-to-earnings (P/E) ratio of 23.5 vs. the benchmark’s 24.3
How have Microsoft’s revenues grown over recent years?
Microsoft’s Revenues have seen notable growth over recent years.
• Microsoft has seen its top line grow at an average rate of 13.5% over the last 3 years (vs. increase of 6.9% for S&P 500)
• Its revenues have grown 15.0% from $228 Bil to $262 Bil in the last 12 months (vs. growth of 5.2% for S&P 500)
• Also, its quarterly revenues grew 12.3% to $70 Bil in the most recent quarter from $62 Bil a year ago (vs. 5.0% improvement for S&P 500)
How profitable is Microsoft?
Microsoft’s profit margins are considerably higher than most companies in the Trefis coverage universe.
• Microsoft’s Operating Income over the last four quarters was $118 Bil, which represents a considerably high Operating Margin of 45.0% (vs. 13.0% for S&P 500)
• Microsoft’s Operating Cash Flow (OCF) over this period was $126 Bil, pointing to a considerably high OCF-to-Sales Ratio of 48.0% (vs. 15.7% for S&P 500)
Does Microsoft look financially stable?
Microsoft’s balance sheet looks strong.
• Microsoft’s Debt figure was $62 Bil at the end of the most recent quarter, while its market capitalization is $2.9 Tril (as of 3/10/2025). This implies a very strong Debt-to-Equity Ratio of 2.1% (vs. 19.0% for S&P 500). [Note: A lower Debt-to-Equity Ratio is desirable]
• Cash (including cash equivalents) makes up $72 Bil of the $534 Bil in Total Assets for Microsoft. This yields a moderate Cash-to-Assets Ratio of 13.4%(vs. 14.8% for S&P 500)
How resilient is MSFT stock during a downturn?
MSFT stock has seen an impact that was slightly better than the benchmark S&P 500 index during some of the recent downturns. Worried about the impact of a market crash on MSFT stock? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.
Inflation Shock (2022)
• MSFT stock fell 36.0% from a high of $334.75 on 3 January 2022 to $214.25 on 3 November 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 2 June 2023
• Since then, the stock has increased to a high of $467.56 on 7 July 2024 and currently trades at around $380
Covid Pandemic (2020)
• MSFT stock fell 27.7% from a high of $187.28 on 19 February 2020 to $135.42 on 16 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 8 June 2020
Global Financial Crisis (2008)
• MSFT stock fell 59.1% from a high of $37.06 on 4 November 2007 to $15.15 on 9 March 2009, vs. a peak-to-trough decline of 56.8% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 6 November 2013
Putting all the pieces together: What it means for MSFT stock
In summary, Microsoft’s performance across the parameters detailed above are as follows:
• Growth: Very Strong
• Profitability: Extremely Strong
• Financial Stability: Very Strong
• Downturn Resilience: Neutral
• Overall: Very Strong
Hence, despite its very high valuation, the stock appears attractive but volatile, which supports our conclusion that MSFT is a tricky stock to buy.
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