Sign InMicrosoft Corporation (MSFT) Shows Strong Fundamentals and Technicals, Recommended Buy
Summary
As of September 22, 2023, Microsoft Corporation's stock (MSFT) is valued on the high side with a PE ratio of 32.75, suggesting investors are expecting high earnings growth, and with bullish technical indicators, it is recommended to categorize the stock as a Buy.
Stock Analysis – Microsoft Corporation (MSFT)
Fundamental Analysis
As of the close of trading on September 22, 2023, Microsoft Corporation had a market capitalization of $2.36 trillion. The company's Earnings Per Share (EPS) stood at 9.68, and with a closing price of $317.01, the Price to Earnings (PE) ratio was 32.75. The PE ratio signifies that for every dollar of earnings, investors are willing to pay $32.75. This valuation is on the high side, suggesting that investors are expecting high earnings growth from the company.
The firm also has a large number of outstanding shares, totaling 7.43 billion.
The company's performance had been receiving substantial investor interest, with the traded volume standing at 21.10 million shares against its average volume of 24.88 million shares. The high trading volume suggests investor interest and liquidity in the stock.
Furthermore, Microsoft has shown good prospects with an upward trend in the cloud computing industry, as noted in the recent news about the company's profitability in the cloud sector. The company has also restructured its acquisition deal of Activision Blizzard, suggesting expansion and a potential increase in its market share in the gaming industry.
Technical Analysis
On the technical front, the MSFT stock closed at $317.01 on Sep 22,000, a change of -2.52 (-0.79%) from the previous close.
Over the last 50 days, the stock has been trading above its 200-day moving average (331.46 compared to 294.12). The stock’s 14-day Relative Strength Index (RSI) of 39 indicates that the stock is nearing oversold territory, which might trigger a buying opportunity for short-term traders.
An analysis of the Moving Average Convergence Divergence (MACD) indicates that the MACD line is above the signal line (MACD of 4.62), suggesting a bullish trend. The stock’s Average True Range (ATR) of 1.95 reflects the degree of price volatility, which might lead to more trading opportunities for short-term traders.
The stock has support at $316.88 and resistance at $337.77, indicating a potential upcoming price swing.
Price Predictions
The Discounted Cash Flow (DCF) analysis suggests a fair value of $321.65 for MSFT, which is higher than the current price. Taking into account the bullish signals from the technical charts and the solid fundamental factors, it's plausible to predict that MSFT might trade above $320 on the next trading day, September 25, 2023.
Over the upcoming week, it can be anticipated that the stock will trend towards its consensus target of $331.16, considering the DCF analysis and its improving cloud computing business, potential Activision deal, and strong buy consensus from numerous analysts.
Final Evaluation
Based on the fundamentals, its strategic growth in the cloud computing sector, and promising technical analysis, it's recommended to categorize Microsoft Corporation (MSFT) as a Buy. However, factors such as macroeconomic indicators, upcoming Q3 earnings data, and the completion of the Activision Blizzard acquisition should be vigilantly tracked as they may influence the stock's performance. The overall consensus among numerous analysts also leans towards 'Buy,' reinforcing the arguments for this assessment.
