Sign InMicrosoft Corporation's Stock Shows Promise for Long-Term Growth with Caution Needed for Short-Term Traders
Summary
On August 8, 2023, Microsoft Corporation's stock experienced a decrease, but the company's fundamentals and positive news suggest long-term growth potential, although caution should be exercised due to current technical indicators, with short-term traders potentially seeing an upward price adjustment.
Company Profile
Microsoft Corporation is one of the major players in the tech industry, traded under the ticker symbol MSFT on the NASDAQ. As of the company's closing on August 8, 2023, from the NASDAQ, the last closing price was at $326.05, experiencing a decrease of $4.06 (-1.23%).
Fundamental Analysis
In terms of market capitalization, Microsoft is a powerhouse worth about $2.42 trillion, with approximately 7.44 billion outstanding shares. The Earnings Per Share (EPS) is fairly strong at $9.23, and the Price to Earnings (PE) ratio at 35.33 signifies a sign of the investors' confidence in the high expected growth of the company.
The company's Discounted Cash Flow (DCF), which is essentially the projection of future cash flows and their value today, is calculated to be $330.69, which is slightly above the stock's recent closing price.
Moreover, analysts have a high expectation for the software giant's stock, with a Target High of $420, and a Target Low of $220, from which we can infer a Target Median of $305 and a consensus of $319.14, placing the company's shares in the bullish territory.
Additionally, the recent news surrounding the company lays positive sentiment, highlighting the company's potential due to increased spending on AI and how it's seen as a long-term investment due to its vast reach in the field of PCs, software, and cloud services. Hints are also noticeable about a promising partnership with Leidos, which could be a potential boost to the defense industry.
Technical Analysis
Microsoft's stock is currently trading at a lower range compared to its 50-day Moving Average of $336.57, indicating a down-trending short-term performance. However, the stock is trading well above its 200-day Moving Average of $280.04, suggesting a general upward trend in the longer-term.
The 14-day Relative Strength Index (RSI14) is calculated as 28, which is typically considered as the oversold territory, hinting at a potential upward price correction.
The allocated Support and Resistance levels for the stock are $325.92 and $337.77 respectively, with the close price leveling just above the support line.
The Average True Range (ATR), which measures volatility, stands at 2.43. Meanwhile, the Moving Average Convergence Divergence (MACD), a trend-following momentum indicator, is at 1.10, potentially signaling a downward trend.
Price Prediction and Recommendation
Though the fundamentals show promise for long-term growth, the technical indicators suggest a potential short-term bearish trend. However, the oversold condition as indicated by RSI might indicate an impending price adjustment on the upside, bringing a likelihood that the stock could experience a slight climb in the following trading day to and potentially throughout the upcoming week.
In conclusion, Microsoft Corporation's stock, from a fundamental point of view, is considered a strong "Buy." However, short-term traders might want to tread with caution due to the current technical indicators. As the company's next earnings report is also drawing closer (October 23, 2023), it will be important to keep a close watch on the company's financial numbers and potential earnings surprises. Investors, particularly those with a long-term horizon, may consider current price levels as an opportunity to accumulate shares. It's essential, however, to closely observe the technical indicators, market movements, and upcoming company news.
