Stocks and shares

Deep dive into Microsoft stocks: what do analysts see in their crystal ball?

Microsoft (NASDAQ: MSFT) has exhibited an impressive upward trend in the stock market since the beginning of 2023, with Microsoft stocks trading at $307.26 as of May 1, 2023, and a market capitalisation of around $2.285 trillion. 

Microsoft’s price/earnings ratio is 33.33, which is a strong indicator of investor confidence in the company’s future earnings potential.

Microsoft’s earnings per share of $9.2 is currently competitive in the technology industry. 

The next earnings call for Microsoft is scheduled between July 24 – July 28, 2023, with a target estimate price of $324.04, approximately $17 higher than the spot price.

In addition, the moving average convergence divergence (MACD) patterns for Microsoft stock are also bullish, indicating the current trend is upward. 

Microsoft is performing exceptionally well in a unique class of tech stocks, defying market trends in recent months.

Despite ongoing inflationary concerns, rising interest rates, and many economic pressures, Microsoft seems to hold its own, making it an excellent investment opportunity for traders and investors alike.

However, the consensus among analysts is that Microsoft is overvalued, and significantly so.

Despite this, Microsoft stock is still seen as a solid buy option with an overall recommendation rating of 1.8 on a scale of 1 (strong buy) to 5 (sell), according to Yahoo! Finance analysts.

Regarding recent upgrades and downgrades, TD Cowen rated Microsoft as an outperform, Bank of America Securities upgraded Microsoft to a buy, and Deutsche Bank upgraded Microsoft to a buy.

Other bullish financial institutions on Microsoft include RBC Capital, Piper Sandler, and Raymond James.

A lot of the buzz around Microsoft lately has been centred around the popularity of its latest artificial intelligence-inspired phenomenon – Open AI & Chat GPT.

This may contribute to the bullish outlook for the company’s future growth.

Microsoft has shown a consistent increase in total revenue over the years, with notable growth since the release of its income statements on June 30, 2019.

The revenue for Microsoft in 2019 was $125,843,000, which rose to $143,015,000 in 2020, $168,088,000 in 2021, $198,270,000 in 2022, and $204,094,000 (TTM) in 2023.

The basic earnings per share have fluctuated between $5.11 in 2019 to $5.82 in 2020, $8.12 in 2021, and $9.17 in 2022.

In addition to revenue and earnings, it’s also important to consider earnings expectations and actual earnings when determining whether to buy, hold, or sell Microsoft stock.

If actual earnings exceed expectations, it’s generally seen as bullish for the stock, while falling short of expectations is typically bearish.

Microsoft has experienced an earnings beat since Q3 2022, followed by earnings beats in Q4 2022 and Q1 2023. Currently, the earnings expectation for Q2 2023 is $2.56, and analysts have taken note of the slight earnings beats that Microsoft stock has generated since Q3 2022.

MSFT Moving Averages

Looking at the stock chart, the 50-day moving average for Microsoft is $272.94, while the 200-day moving average is $255.26.

When the short-term moving average is higher than the long-term moving average, it’s an indicator that the stock is trending higher.

Although there have been notable dips in the chart, such as in December 2022, late February, and the end of April 2023, the overall trend remains bullish.

Our Bollinger Bands analysis indicates that Microsoft stock is currently overbought, with the upper band indicating a potential price target of $302.70 while the current stock price is at $307.26.

This suggests that the stock may move closer to the centre of the Bollinger Band, indicating a potential period of selling activity as profit-taking occurs.

The Bollinger Bands analysis aligns with the view of many analysts that Microsoft stock is currently overvalued.

Traders and investors may consider this information when deciding whether to buy, hold, or sell Microsoft stock.

Opinion: Analysts are Optimistic about MSFT Stocks

In conclusion, Microsoft stock (NASDAQ: MSFT) has been defying market expectations with its bullish trend, driven by the company’s consistent revenue growth and positive earnings expectations.

Although analysts consider Microsoft to be overvalued, many major financial institutions remain bullish on the company, including TD Cowen, Bank of America Securities, and Deutsche Bank.

Additionally, the popularity of Microsoft’s latest artificial intelligence-inspired phenomenon, Open AI & Chat GPT, may contribute to the company’s growth prospects.

While the Bollinger bands indicate an overbought position, the overall trend remains bullish, and Microsoft’s performance outlook is positive in the short-term, medium-term, and long term.

Investors should closely monitor earnings expectations and actual earnings moving forward.

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