Longer-term investors should buy Microsoft Corporation (NASDAQ:MSFT) stock on dips
With its 30.5 trailing P/E ratio and its $1 trillion market cap, Microsoft (NASDAQ:MSFT) stock price largely reflects its current two main growth engines: its cloud business and its software-as-a-service offerings. Consequently, investors should not expect MSFT stock to rally tremendously when it reports its fiscal fourth-quarter results after the market closes on Thursday.
Still, the growth of MSFT’s cloud business and its SaaS offerings could modestly surpass average expectations, triggering a small increase in MSFT stock.And over the medium term,MSFT has multiple, strong potential catalysts that could push MSFT stock much higher.
The Valuation of Microsoft Stock Is Already Elevated
But, as noted earlier, the valuation and market cap of MSFT stock are rather elevated. In fact, Microsoft stock has the highest market cap of any publicly traded company, narrowly beating out Apple (NASDAQ:AAPL) and Amazon. As a result, a great deal of cloud growth is likely already baked into MSFT stock.
In fact, just last week, Cowen analyst Nick Yako initiated coverage of Microsoft stock with an Outperform rating, predicting that the combined revenue generated by Azure and the company’s SaaS business, Office 365 could rise by $100 billion in five years. He added that the company’s revenue and earnings could easily grow by at least 10% annually over the next five years. But despite his optimism, Yako set a $150 price target on MSFT stock, meaning that he expects Microsoft stock to climb less than 10% over the next year.
Overall, the bias in prices is: Upwards.
Note: this chart shows extraordinary price action to the upside.
The projected upper bound is: 141.44.
The projected lower bound is: 131.42.
The projected closing price is: 136.43.
A big black candle occurred. This is bearish, as prices closed significantly lower than they opened. If the candle appears when prices are “high,” it may be the first sign of a top. If it occurs when prices are confronting an overhead resistance area (e.g., a moving average, trendline, or price resistance level), the long black candle adds credibility to the resistance. Similarly, if the candle appears as prices break below a support area, the long black candle confirms the failure of the support area.
During the past 10 bars, there have been 7 white candles and 3 black candles for a net of 4 white candles. During the past 50 bars, there have been 30 white candles and 20 black candles for a net of 10 white candles.
Three black candles occurred in the last three days. Although these candles were not big enough to create three black crows, the steady downward pattern is bearish.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 36.8056. This is not an overbought or oversold reading. The last signal was a sell 1 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 55.19. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 15 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 1. This is not a topping or bottoming area. The last signal was a sell 1 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 1 period(s) ago.
Rex Takasugi – TD Profile
MICROSOFT CP closed down -0.810 at 136.270. Volume was 16% below average (neutral) and Bollinger Bands were 40% narrower than normal.
Open High Low Close Volume___
137.700 137.930 136.220 136.270 20,210,956
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 137.53 131.12 115.82
Volatility: 12 25 34
Volume: 19,356,096 23,673,468 30,531,060
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
MICROSOFT CP is currently 17.7% above its 200-period moving average and is in an upward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of MSFT.O at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on MSFT.O and have had this outlook for the last 25 periods. our momentum oscillator has set a new 14-period low while the security price has not. This is a bearish divergence.