Microsoft will publish its first quarter results on October 27, after close of trading
Microsoft launched Azure Communication Services, which will compete with Twilio and Amazon
Fund managers have a buy recommendation from Microsoft and a price target of $260
Microsoft stock (NASDAQ: MSFT) has risen from $204 to $223 in less than a few weeks, and the current price is around $213. Microsoft has found strong support above $200, but the price is still unable to break through the $230 resistance.
Fundamental analysis: The pandemic has only strengthened Microsoft’s position
Even with the COVID 19 pandemic, Microsoft’s business is doing well, and the company will see an increase in revenue for the next financial year. Microsoft has recently launched Azure Communication Services, which will compete with Twilio and Amazon.
This service allows developers to add video, voice, chat and text messages across applications, websites and mobile platforms. Microsoft is certainly a great company, and the pandemic has only strengthened its position.
Microsoft will release its first quarter results on Tuesday, October 27, after close of trading. The consensus EPS estimate is $1.55 (+12.3% y/y) and the consensus income estimate is $35.78B (+8.1% y/y), which is very good.
Microsoft has seen rising dividends since 2006 and investors can expect a 10% dividend increase. Nevertheless, I believe that Microsoft is currently overvalued and the main drivers of Microsoft’s recent capital growth are external.
With a market capitalization of $1.59T, this stock is expensive and represents an opportunity only for short-term traders. The profitability figures also confirm this, the PER is above 30, which confirms that the price of Microsoft shares is expensive.
There are some obvious risks in trading this share at present, but the stability and size of Microsoft will always attract potential investors and traders.
The attention of investors is also focused on the negotiations on the US economic stimulus package and the upcoming presidential elections. The U.S. presidential elections will be held on November 3, and according to the polls, the rival of U.S. President Trump, Joe Biden, is leading.
Technical analysis: Bulls focus on breaking through the $220 resistance level
Data source: tradingview.com
On this diagram I have marked important resistance and support levels. The important support levels are $200 and $190, $220 and $230 represent the resistance levels.
As long as the price is above the $200 support, this stock is in the “buy” area and there is no sign of a trend reversal. If the price falls to this support and we get a “bullish” confirmation candle, this would be a very good entry point for short-term traders trading Microsoft shares with “stop loss” and “take profit” orders.
A rise above $230 supports the continuation of the bullish trend for Microsoft, and the next price target could be around 250. On the other hand, it would be a strong “sell” signal if the price falls below $200, and we have the open path to $190.
Summary
Fund managers have a buy recommendation for Microsoft shares and a price target of $260, which I think is a little optimistic. Even with the COVID 19 pandemic, Microsoft’s business is doing well and the company will publish its first quarter results on October 27. Microsoft’s valuation is currently at an almost 20-year high, and as long as the price of MSFT is above $200, the stock is in the “buy” zone.
