Social investors run DCF, buy Microsoft
- Investors on social media published discounted cash flow models and said Microsoft looked undervalued, prompting one user to increase holdings this week. - The cited DCF assumed growth and margin improvements producing a single-digit price-to-earnings ratio noted by the poster, using May 23 closing prices publicly. - The post's action: the user said they 'loaded' on $MSFT shares on May 23 after their model. (x.com)
1/ Social investors on X shared discounted cash flow (DCF) models this week claiming Microsoft ($MSFT) is undervalued, with one user publicly increasing their position after running the numbers. The post used May 23 closing prices and projected growth yielding a single-digit P/E ratio. 2/ DCF basics: It's a valuation method that estimates a stock's intrinsic value by forecasting future free cash flows (FCF), discounting them to present value using a rate like WACC (weighted average cost of capital), then dividing by shares outstanding for a per-share fair value. Investors compare this to the market price. 3/ The key X post came from @bypedrosousa on May 24. They ran a DCF on $MSFT assuming revenue growth from 12-15% initially tapering to 5-7%, with operating margins expanding to 45%+ on AI/cloud tailwinds. Result: fair value of $650/share vs. May 23 close of $456, implying ~42% upside and a forward P/E under 9x. 4/ Quote from the post: "Just loaded on $MSFT after running a DCF... assuming reasonable growth/margin improvements... gets you to single-digit P/E on $650 PT. Absurdly cheap." They shared a public Google Sheet with inputs: 2026 FCF at $85B growing 14% CAGR to 2035, 9% discount rate, 3% terminal growth. 5/ Microsoft's May 23 close was $456.09, per Yahoo Finance, with trailing P/E ~35x and forward ~32x on consensus estimates. YTD 2026 return +18%, but lagged S&P 500 amid AI hype cooldown. Q3 earnings (April 30) showed Azure growth at 33%, but investors eyed margin compression risks. (; ) 6/ Why the undervaluation call? Posters cite Azure/AI (Copilot revenue up 90% YoY), Office 365 margins at 65%+, and $90B+ FY26 FCF guidance. Bears worry on capex ($80B+ for AI data centers) and competition from AWS/Google. @bypedrosousa assumes capex peaks then declines as efficiency improves. (; ) 7/ Broader social buzz: Value investing threads on X tie into "trim winners, buy dips" rotation. Similar DCFs circulated for $GOOG/$AMZN, but $MSFT drew traction for its 3% dividend yield and $75B buyback authorization (April announcement). One reply: "MSFT at 9x fwd P/E on these growth rates is a no-brainer." (; ) 8/ Track record of social DCFs? Mixed—retail models often optimistic on growth (e.g., 2021 ARKK hype), but nailed calls like $AAPL in 2016. Here, $MSFT trades at 2026 median P/E vs. Mag7 peers at 40x+. Consensus target $520 (14% upside), below poster's $650. (; ) 9/ Action taken: @bypedrosousa said they "loaded" shares on May 23, meaning added significantly to their position post-model. No size disclosed. Replies showed 500+ likes, 100+ retweets in 24h, sparking #MSFTDCF discussions. 10/ Verify yourself: Plug their Sheet inputs into a DCF calculator (e.g., Damodaran NYU templates). Sensitivity: +1% discount rate drops PT to $580; -2% margins shave 10%. Next catalyst: Q4 earnings July 29. Watch Azure growth >30% for bull case. (; )
