The value of Microsoft (MSFT) stock has changed course since November last year after a long-running uptrend that started in March 2020 and pushed the Bill Gates-founded company’s valuation to almost $2. .6 billion.
A change in macroeconomic conditions in the United States, in particular an interest rate hike by the Federal Reserve (Fed), affected the trend in Microsoft stocks as equity risk premia rose.
The company’s fundamentals remain strong despite these potentially short-lived headwinds.
Could the decline present a buying opportunity?
In this article, we analyze the latest Microsoft stock news as well as its price action and fundamentals to possibly answer that question.
Microsoft Stock Analysis: Technical Views and Price Drivers
So far this year (as of June 7), Microsoft stock has fallen nearly 18.32% to $266.33 per share.
The market is waiting to see how the Fed will act to contain inflation in the United States. There is a conversion around quantitative tightening, which could indicate that the Fed is willing to reduce its balance sheet by $9 billion for the first time in more than a decade. In this case, the liquidity of the financial markets could decrease.
The Microsoft stock price is 23% below its 52-week high and 11% below its 200-day simple moving average.
As of June 7, price action was clearly trending lower as indicated by a series of lower highs and lower lows that began last November. Momentum indicators sent no signals that the outlook for Microsoft stock could change soon.
The Relative Strength Index (RSI) sits at 48.93 and hasn’t reached overbought levels since November, while the Moving Average Convergence Divergence (MACD) remained in negative territory despite trending up. those last weeks.
According to Piero Cingari, analyst at Capital.com: “From a technical perspective, MSFT has been trading in a declining channel since the start of the year, with the upper line set by the descending highs of December 2021 and late March 2022. , and the lower line connecting the January 2022 and May 2022 lows.
“For a trend reversal in MSFT, a move back above the psychological threshold of $300 is needed. This level would also trigger a number of key technical breakouts (downward channel, 50% Fibonacci retracement level from the December highs and the 200-day moving average).
Microsoft Fundamental Analysis: Latest Results
On April 26, Microsoft released its financial results covering the third quarter of fiscal 2022. They beat analysts’ earnings forecasts. Total revenue in the three months ended March 31 reached $49.4 billion, above the $49.05 billion expected, resulting in an 18% year-over-year increase.
The company’s Intelligent Cloud segment was the best performer, with sales up 26% from the same period a year ago. Next is the productivity and business process segment, which saw a 17% jump year-over-year.
Gross margins edged down 40 basis points from a year ago to 68.4%, while the company’s GAAP operating income increased 19% to $20.36 billion. of dollars. The company’s GAAP net income ended the year up 8% to $16.73 billion, while earnings per share rose 9% to $2.22.
Microsoft’s long-term debt at the end of this quarter was $48.18 billion. Total cash, cash equivalents and short-term investments ended at $104.69 billion.
Microsoft pays a quarterly dividend of $0.62 per share. This results in an annualized dividend of $2.48 for a dividend yield of 0.92%.
“Microsoft’s price-earnings (PE) ratio, one of the stock market’s most important valuation metrics, is currently at 28x, in line with its historical average and slightly more attractive than the tech infrastructure industry. /software (33x),” Cingari said. “MSFT stock is therefore not too expensive relative to its history, indicating that the market may have already priced in some of the deteriorating macro outlook. “
Does this bode well for the Microsoft stock price forecast? Let’s see what analysts think.
Microsoft Stock Forecast: Analyst Sentiment
According to data from MarketBeat, the consensus recommendation for Microsoft stock, as of June 7, was almost unanimously bullish with 29 of 30 analysts rating the stock as a “buy.” An analyst gave it a “holding” rating.
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The average MSFT stock price target for the next 12 months has been set at $355.61 per share, implying upside potential of 32.32% from the June 6 closing price of 268 $.75, if this goal is reached.
Analysts pegged the highest future Microsoft stock price for the same period at $411 per share and the lowest at $298.
Despite this positive view, several companies cut their price targets for MSFT following the release of its latest quarterly report, including Stifel Nicolaus and Jefferies Financial Group. No analyst changed their recommendation for the stock despite the latest decline.
Following the release of the latest quarterly report and guidance update, Morningstar analyst Dan Romanoff said, “We believe digital transformation projects continue to fuel overall demand and we are also encouraged by the strength of Azure, which has seen Tier 1 workloads move to the cloud in larger, longer-term agreements than ever before. »
He added, “Microsoft remains impressive in its ability to drive both growth and margins at scale and we believe there is more to come on both fronts. We believe the results reinforce our thesis centered on the proliferation of hybrid cloud and Azure environments, as the company continues to use its on-premises dominance to allow customers to move to the cloud at their own pace.
Commenting on the future of Microsoft, Cingari concluded, “MSFT is a high quality stock within the technology industry. Over the past 5 years, MSFT’s earnings have grown an average of 28.1% per year and dividends have increased steadily over the past decade. The company’s balance sheet is also extremely healthy, with assets exceeding liabilities and debt exposure dropping from 100% to 30% of equity over the past 3 years. »
Microsoft Stock Forecast: Price Targets for 2022-2025
What’s in store for Microsoft stock predictions 2022 and beyond? The algorithm-based forecasting services provided longer-term Microsoft stock projections, as of June 7.
Wallet Investor had a neutral short-term outlook for Microsoft shares based on an analysis of several technical indicators. For the next 14 days, the base estimate of Microsoft’s future stock price ranged between $275.532 and $282.639.
Meanwhile, for December 2022, Wallet Investor predicted the stock would trade at $312.368, rise to $380.243 by the end of 2023, $448.448 by the end of 2024, and top $500 by the end of 2023. end of 2025, trading at an average price of $516.435.
Although the service did not give price targets for 2030, its five-year projected MSFT price was $608.896 for June 2027.
GovCapital had an even more bullish outlook for MSFT shares, as of June 7, expecting the price to reach $1,045.292 by the end of 2025 and $1,493.600 by June 2027.
These predictions were written by algorithms based on an analysis of Microsoft stock price history. There can be no assurance that the price of MSFT shares will reach these levels. Therefore, your own due diligence should be done before investing in Microsoft.
Note that predictions based on algorithms may be wrong and past performance is no guarantee of future returns. Always do your own analysis before trading. And never trade money you can’t afford to lose.
FAQs
Is the Microsoft stock a buy?
As of June 7, 29 of 30 people surveyed by MarketBeat rated the stock as a “Buy.” However, these opinions should not be taken as a recommendation to invest or trade in Microsoft stock, as many factors not taken into account in these predictions could affect MSFT’s actual performance. Always do your own analysis before trading. And never trade money you can’t afford to lose.
Will Microsoft stock go up or down?
According to estimates from third-party forecasting services Wallet Investor and GovCapital (as of June 7), Microsoft’s price could rise in the medium to long term.
Why did the Microsoft stock price go down?
Microsoft stock prices have been falling since November 2021 as market participants believe the US Federal Reserve will adopt hawkish measures, including raising interest rates and shrinking the central bank’s balance sheet, to reduce inflation in the country. This increases risk premia and reduces the valuation of risky assets such as stocks.
How far can Microsoft action go?
According to Wallet Investor estimates for 2025, Microsoft stock could reach over $500 per share by the end of the year.
How often do Microsoft stocks pay dividends?
Microsoft stock dividends are paid on a quarterly basis. They are usually paid in March, June, September and December. The quarterly dividend stands at $0.62 per share at the time of writing (June 7), which translates to a forward-looking annualized dividend yield of 0.92%.
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