Microsoft stock has fallen 8% in the past month, what’s next?

With Microsoft share (NASDAQ: MSFT) down -8% in the past month from around $227 to around $209, many Trefis users have been asking: how likely is the decline to continue next week, next month or during next quarter?

According to the Trefis Machine Learning Engine, which identifies trends in company stock price data over the past 20 years, the average Microsoft stock returns a solid 14% then period of one month (21 working days) after registering a decrease of 20% compared to the previous month (21 trading days). Notably, however, the stock is very likely to surpass the S&P500 over the next month (21 trading days), with an expected excess return of ten% compared to the S&P500.

But how would those numbers change if you wanted to hold Microsoft stock for a shorter or longer period? You can test the response and many other combinations on the Trefis Machine Learning Engine to Test Microsoft Stock’s Chances of Upside After a Fall. You can test the chances of recovery over different time intervals of a quarter, a month or even a single day!

MACHINE LEARNING ENGINE – try it yourself:

IF The MSFT share evolved by -5% over 5 trading days, THEN over the next 21 trading days, MSFT stock moves one Medium of 2.4%, which implies a excess return 1.5% against the S&P500.

More importantly, there is a 55.8% chance of a positive return over the next 21 trading days and a 53.9% probability of a positive excess return after a variation of -5% over 5 trading days.

Some fun scenarios, FAQs, and making sense of Microsoft stock movements:

Question 1: Is the average Microsoft stock return higher after a decline?

To respond:

Consider two situations,

Case 1: Microsoft stock drops -5% or more in one week

Case 2: Microsoft stock goes up 5% or more in a week

Is the average Microsoft stock return higher in the next month after Case 1 or Case 2?

MSFT action fares better after case 1with an average return of 5.6% over the following month (21 trading days) in case 1 (where the security has just suffered a loss of 5% over the previous week), compared to an average return of 0.8% for case 2.

By comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days in Case 1, and an average return of just 0.5% for Case 2, as detailed in our dashboard which details the average return of the S&P 500 after a decline or rise.

Try the Trefis machine learning engine above to see for yourself how Microsoft stock is likely to perform after a specific gain or loss over a period of time.

Question 2: Does patience pay off?

To respond:

If you buy and hold Microsoft stock, it’s expected that over time, the short-term fluctuations will cancel each other out and the long-term positive trend will favor you – at least if the company is otherwise strong.

All in all, according to data and calculations from the Trefis machine learning engine, patience absolutely pays off for most actions!

For the MSFT stock, the returns over the next N days after a variation of -5% over the last 5 trading days are detailed in the table below, as well as the returns of the S&P500:

You can try the engine to see what this chart looks like for Microsoft after a bigger loss in the last week, month, or quarter.

Question 3: What about the average return after a rise if you wait a bit?

To respond:

The average return after a rise is naturally lower than a fall as detailed in the previous question. Interestingly, though, if a stock has been gaining in the last few days, you’re better off avoiding short-term bets for most stocks.

The returns of MSFT over the next N days after a 5% change over the last 5 trading days are detailed in the table below, along with the returns of the S&P500:

It’s powerful enough to test the Microsoft stock trend for yourself by changing the entries in the charts above.

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