Sign InMicrosoft (MSFT) Stock Shows Positive Momentum and Potential for Growth
Summary
Microsoft Corporation (MSFT) is trading close to its year-high, indicating positive momentum, with technical indicators suggesting a bullish signal, leading to a recommendation to buy the stock; however, investors should monitor ongoing regulatory hurdles related to the company's intentions to acquire Activision Blizzard. (Analysis conducted on July 12, 2023)
Technical Analysis
Microsoft Corporation (MSFT) closed at $337.20 on July 12, 2023, marking a 1.42% increase from the previous trading day. This movement was less than the 2.71% uptick seen from the S&P 500 on the same day. The stock lies in the middle of its 52-week high of $351.47 and its 52-week low of $213.43. MSFT is trading closer to its year-high, indicating positive ongoing momentum.
The stock's Relative Strength Index (RSI) over the last 14 days stands at 54. This neither-overbought-nor-oversold state implies MSFT is currently well-positioned for potential price movement. The 50-day moving average of MSFT is $325.47, while it stands at $270.24 for the 200-day moving average. The current price above both these averages signifies bullishness.
Furthermore, the Moving Average Convergence Divergence (MACD) for the last three months stands at 2.24 — higher than the zero centerline, signifying a bullish signal.
Fundamental Analysis
Microsoft, listed on NASDAQ, has a sizable market cap of $2.51 trillion and reported an EPS of $9.22. With a price-to-earnings ratio of 36.57, MSFT is trading at a premium compared to the average tech company on the market. The company has 7.44 billion shares outstanding and a trading volume of 27.83 million, slightly higher than the average volume of 27.20 million.
The company's discounted cash flow (DCF) analysis brings a value of $339.05, which is slightly higher than the last closing price, suggesting that shares might be undervalued.
Price target consensus based on analysts' recommendations stands at $311.97, slightly under the current trading price. But it's worth noting that the target high is $420, substantially more than the recent closing price.
Recent News and Developments
The company has been in the limelight for some significant news. Microsoft is making giant strides towards expanding its product ecosystem, as apparent from its efforts to enter the secure service edge market. This could potentially present a significant challenge to cybersecurity leader Zscaler. However, the news might have led to a drop in Zscaler's stocks.
Furthermore, Microsoft's intentions to acquire gaming firm Activision Blizzard have been green-lit, despite the FTC's attempts to block the merger. This acquisition, if successful, could significantly boost Microsoft's portfolio in the gaming sector but is currently pending approval from the CMA.
Stock Forecast and Evaluation
Taking into account the technical and fundamental data along with recent developments, the recommendation for Microsoft Corporation (MSFT) stock leans towards a Buy. This is based on the fact that the company continues to innovate and tap potential market segments—maintaining a healthy competitive stance. Moreover, technical indicators are positive, with the stock trading above both 50-day and 200-day moving averages.
The acquisition of Activision Blizzard represents a significant growth platform for the company if successful, potentially driving stock price up. As such, the stock price by close of the next trading day, July 13, 2023, is expected to be in line with or higher than the DCF value of $339.05.
However, investors should remain cognizant of the ongoing regulatory hurdles regarding the acquisition and maintain a close eye on subsequent developments that could impact the final recommendation.
