With Microsoft shares up 17% and 55% year-to-date and over the past 12 months, respectively, investors are waiting for the next big move in the share price. That could happen on Tuesday, April 27, when the Redmond, Washington-based software company releases its third quarter financial results.
The Apple Maven, primarily concerned with its Cupertino-based counterpart, will keep an eye on Microsoft’s performance in early 2021. I will cover the results release and conference call via a live blog on April 27, starting at 16 h EST. Mark your calendars!
Expect another quarter of mic drop
Wall Street currently holds a “strong buy†consensus rating on Microsoft shares. However, in part because the stock has been so hot lately, the average stock price target is only 4% above current levels, suggesting little upside opportunity.
Regarding expectations for the third fiscal quarter, analysts also seem optimistic. The table below summarizes the expected results: revenue growth of 17% year-on-year and EPS (earnings per share) increase of 27%. For reference, the former would be Microsoft’s best business performance since September 2018.
Figure 1: Microsoft’s profit and revenue estimates.
Key drivers of Microsoft’s performance
As I explained recently, Microsoft has a diverse business model. Unlike Apple, whose iPhone still accounts for around 50% of revenue, the Redmond tech company doesn’t rely on one or more products and services to drive sales and profits. See below.
Figure 2: Pie chart of Microsoft, Apple and Facebook by sector revenue.
I expect the momentum from the recent video game console refresh cycle to support the “more personal computer†segment. In the same category of activity, home support forces could also increase advertising revenue for Surface, Windows licenses and Bing.
Azure is almost guaranteed to show strong double-digit sales growth within the smart cloud. The more important question, however, is whether the increase in revenue will be enough to impress investors. The pace of growth has improved over the past two quarters, although the secular trend is downward, as the cloud computing platform gains momentum.
Finally, productivity and business processes are expected to show continued strength in the offering of products like Office 365 and cloud-based Dynamics. The ongoing digital transformation should also bode well for LinkedIn, Skype and OneDrive.
Quick question: $ 2,000 billion?
Could earnings season provide the fuel Microsoft needs to break through the $ 2 trillion valuation and join Apple stocks in this select group? Microsoft stock is currently valued at $ 1.97 trillion. From there, a modest increase of 1.5% is all that is needed for the benchmark valuation to be reached.
Twitter speaks
Big Tech’s earnings week is looming on the horizon. I asked Twitter: Which large company will impress the most this quarter? Do not hesitate to intervene below.
Explore more data and charts
The table used in this report was supplied by Stock Rover. I was impressed with the breadth and depth of market, stock and ETF information provided by this platform. Stock Rover also helps set up detailed filters, track custom portfolios and measure their performance against a number of benchmarks.
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(Disclaimers: This is not investment advice. The author may go along with one or more actions mentioned in this report. Additionally, the article may contain affiliate links. These partnerships do not influence editorial content. Please support The Apple Maven)
