Microsoft Corporation Faces Short-Term Bearish Trend but Holds Long-Term Promise

Introduction

Microsoft Corporation (MSFT), a renowned technology corporation listed on the NASDAQ, witnessed its last, close price at $327.76 on August 31, 2023, with a minor decrease of -1.03 (-0.31%) in value. The market capitalization of the corporation stands robust at $2.44 trillion. Microsoft reported an impressive EPS of $9.67, and with a PE ratio of 33.89, suggesting the company's overall good health.

Technical Analysis

The 50-Day Moving Average of Microsoft stands at $333.04, relatively higher than its last closing price. This discrepancy suggests a bearish trend. Similarly, the 200-Day Moving Average is $287.74, considerably lower than the closing price, implying the stock may have been overbought--another signal for potential bears.

The stock's RSI14 indicates 59, placing it closer to the overbought zone, which indicates it might trend downward in the short run due to a possible market correction. The MACD (3-month) of -6.68 signifies a bearish trend.

The stock observed a high of $330.91 and a low of $326.78 on its previous trading day. This volatility is reflected in the ATR of 1.96. The stock is currently trading closer to the support level of $327.5 than the resistance level of of $337.77. Observing these markers and the Stop-loss at $314.53, Microsoft's near-term trend might face a downward correction before bouncing back.

Fundamental Analysis

Microsoft enjoys a high market cap of $2.44 trillion, reflecting the substantial scale and valuation of the corporation. At the end of the last trading day, the Average Trading Volume recorded was 21.50 million, slightly below the average volume of 26.47 million. This slight drop in trading volume could indicate a potential decrease in the stock's liquidity in the short term.

Microsoft's positive EPS indicates that the company is profitable. Coupled with its PE ratio of 33.89, it shows the company's good health and positive market sentiment towards the company.

The stock has a consensus rating of "Buy" among the analysts, with 30 analysts recommending "Buy", 4 advising "Hold", and 2 suggesting "Sell".

News and Sentiment Analysis

Recent news suggests Microsoft's engagement in key tech domains such as AI, with mentions of it being one of the ultimate buy-and-hold stock picks for long-term investors. However, some negative sentiments stem from Microsoft's decision to unbundle Teams from the Office suite in Europe to avoid fines from European regulators, potentially impacting their competitive advantage. This might lead to short-term uncertainty and could contribute to the stock's downward pressure.

Despite this, Microsoft's dividend yield is reported to be more substantial than Apple's, indicating positive long-term dividend growth prospects for investors.

Future Stock Performance

Considering the Discounted Cash Flow (DCF), which stands at $332.40, the DCF valuation is slightly higher than the last closing price. This suggests a potential increase in the stock's price in the future. Furthermore, the median target price is $315, with a consensus target of $325.35, both indicators are lower than the DCF, which might predict a short-term correction before the value increase.

Final Evaluation



Given Microsoft's fundamental strength, coupled with the consensus rating leaning towards "Buy", it might be prudent to "Hold" the stock till market corrections subside. The technical indicators suggest potential bearishness in the short term; however, the long-term perspective seems promising given Microsoft's continued growth, profitability, and influence in the tech sector. This assessment does not consider the assumed noise resulting from Microsoft unbundling its Teams service from the Office suite in Europe, which could have an undefined impact on the company's market standing.

For the next trading day, on September 1st, 2023, the stock price is likely to see a minor downward correction, reflecting the trends of technical analysis. For the upcoming week, the stock might follow this bearish short-term trend before it begins to stabilize and trend upwards in accordance with its strong fundamentals.

Recommendation

Based on the above analysis, Microsoft Corporation (MSFT) is rated as a "Hold". Although short-term technical indicators suggest a bearish trend, solid fundamental parameters, backed by promising news sentiment, indicate potential for long-term gains. Consequently, it may be advisable to hold and observe the stock for the upcoming week before making further decisions.