Sign InMicrosoft's Stock Analysis: Bearish Trend, Undervalued Status, Hold Position
Summary
Based on technical and fundamental analysis, Microsoft Corporation's stock is currently experiencing a bearish trend but has the potential for a rebound in the upcoming week, leading to a possible price correction towards its slightly undervalued value of $328.68; with a Hold position recommendation considering the company's strong fundamentals and analyst consensus. (Analysis date: August 14, 2023)
Technical Analysis
As of the last close on August 14, 2023, Microsoft Corporation (NASDAQ: MSFT) was trading at $324.04, experiencing a change of $3.03 (0.94%). The stock has touched a high and low of $324.0454 and $320.08, respectively, within the day, illustrating a moderate intraday volatility. Despite the recent increase, the share price remains below both the 50-day moving average at $335.88 and the 200-day moving average at $282.06. The Moving Average Convergence Divergence (MACD) over a 3-month period stands at -4.12, suggesting a bearish trend.
The Relative Strength Index (RSI14) at 27 indicates oversold conditions. This typically suggests the price has been declining rapidly and a rebound might be due. However, it's advisable to watch trading volumes to assess the likely strength of any potential bounce.
The Average True Range (ATR) value, which measures volatility, stands at 2.23, and the stock's support and resistance levels are $323.38 and $337.77 respectively.
Fundamental Analysis
Microsoft is a large cap company with a market capitalization of $2.41 trillion. It has an Earnings Per Share (EPS) of $9.23 and a Price to Earnings (PE) ratio of 35.11, indicating investors are willing to pay a high price for the company's earnings.
The company's discounted cash flow (DCF) comes in at $328.68, slightly above the last closing price. This suggests that the stock is slightly undervalued at the current market price.
Recommendations from market analysts are skewed towards a buy consensus. Out of 36 analysts, 30 recommend a buy, four hold, and two recommend a sell. The target consensus price is $319.14 with a high and low target price of $420 and $220 respectively.
Outlook and Final Evaluation
Based on the news, Microsoft faces increased competition from Netflix's new gaming streaming service. However, there's also notable positive news of developments such as the introduction of a free trial on Crash Team Rumble. It's important to remember that such updates can generate short-term price volatility.
The current technical indicators suggest that MSFT has a bearish trend, with recent declines in the stock's price. However, the low RSI might indicate a potential rebound. The fundamental analysis indicates that the stock is slightly undervalued based on DCF, and the analyst outlook largely tilts towards a "buy."
Considering both technical and fundamental analysis, and given the oversold market condition and the analyst consensus, the stock could possibly revert to its mean in the upcoming week to attain the DCF value of $328.68.
Predicting stock prices with precision is inherently challenging. It is predicted that Microsoft's stock might trade between the support and resistance levels of $323.38 and $337.77 for the next trading day and potentially reach towards a price of $328.68 within the upcoming week, yet these price levels are subject to numerous unpredictable market factors.
Considering the company's strong fundamentals, the slightly undervalued status, and the "buy" consensus from analysts, the final evaluation for the Microsoft Corporation stock leans more toward a "Hold" position. This takes into account the currently bearish trend, potential near-term volatility due to news impacts, and the belief that the stock may see a price correction towards its DCF value.
