Microsoft Stock Missed Street Expectations in Q4, What’s Next?

Microsoft (NASDAQ:MSFT) stock is down about 16% year-to-date compared to the S&P500 index’s 14% decline over the same period. Moreover, at its current price of $282 per share, it is trading 16% below its fair value of $337 – Trefis’ estimate for Microsoft’s assessment. The tech giant missed consensus estimates in the fourth quarter of fiscal 2022 (July-June fiscal year). However, it still posted a 12% year-over-year increase in total revenue to $51.9 billion. Growth was driven by a 13% increase in productivity and business processes, a 20% jump in intelligent cloud and a modest 2% increase in more personal computing revenue. The more personal computing segment suffered due to negative Windows OEM (original equipment manufacturer) growth and lower Xbox content and services revenue. Overall, the company posted a 2% increase in net profit to $16.7 billion. This was due to a decline in operating margin from 41.4% to 39.6% due to higher cost of revenues.

The company’s total revenue increased 18% year-on-year to $198.3 billion in fiscal 2022, driven by growth in each of the three segments. The productivity and business process segment grew 18% year-over-year, followed by a 25% rise in the intelligent cloud unit. In addition, personal computing revenues increased by 10% during the year. In all, the above revenue growth translated to net income of $72.7 billion, up 19% year-on-year.

Microsoft
MSFT
should continue its growth momentum over the coming quarters. Notably, the consensus estimates for fiscal 2023 first-quarter revenue and profit are $49.91 billion and $2.34, respectively. Globally, Microsoft revenue are expected to touch $220.7 billion in fiscal 2023. Additionally, MSFT’s net profit margin is expected to remain at about the same level as last year. This will likely result in net income of $80.8 billion and annual EPS of $10.87. This, coupled with a P/E multiple of 31x, will lead to a valuation of $337.

With inflation rising and the Fed raising interest rates, Microsoft has fallen 16% this year. Can it fall more? See how low Microsoft stock can go by comparing its drop in past stock market crashes. Here is a summary of how all stocks performed during previous market crashes.

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