Now that 2015 has turned into 2016, strategists and forecasters are trying to figure out what the new year will bring. The stock market may be off to the worst start to a year since 2008. Still, one week may not tell the whole tale for a year. The Dow Jones Industrial Average closed out 2015 at 17,425.03, down 2.2% for the year, and the six-year bull market may have been interrupted. Or has it?
The index performance of the Dow does not account for individual stock dividends, but Microsoft Corp. (NASDAQ: MSFT) ended 2015 at $55.48, for a total return of 22.69%, if you include its dividends.
For the year ahead, Microsoft’s consensus analyst price target from Thomson Reuters was $57.00. If the analysts are correct, the expected total return for Microsoft would be about 5.4%, including its dividend yield of 2.6%.
Since 2016 has gotten off to a very shaky start, the pullback has brought Microsoft shares down to about $52.60 after just four very negative trading days. Suddenly, that 5.4% implied gain leaves an implied total return expectation of almost 12% if the assumptions from just a week earlier hold true.
Now that Satya Nadella has taken over, Microsoft is far different from in the days of Steve Ballmer and Bill Gates. The company has been trying to win ever more in mobile, but its cloud has been a handy success story. Microsoft has streamlined operations it does not deem as being core, and its reliance on Windows update sales seems to be lessening.
The market treated Nadella’s path quite well. How does a 22.69% total return in 2015 sound versus a Dow that fell by about 2.2%? Now consider that the Nadella era stock gains took place at a time during the continued rise of Apple Inc. (NASDAQ: AAPL) and Google — now Alphabet Inc. (NASDAQ: GOOGL) — when PC sales and the desktop-only world have been in decline.
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