The shares of Microsoft (NASDAQ: MSFT) extended their correction from recent highs above USD 227, registered in the second week of November. As long as the price remains above $200, this stock remains in a “bull market” and the pandemic has only strengthened Microsoft’s position.
Fundamentals analysis: Microsoft reported better than expected Q1 results in October this year
Business is good even with the COVID 19 pandemic, but I think Microsoft stock is still expensive. Microsoft reported better first quarter results than expected in October of this year; total revenue rose 12% year-over-year to $31.7 billion, while GAAP earnings per share for the first quarter were $1.82 (beating by $0.28).
“Demand for our cloud offerings led to a strong start to the fiscal year, with our commercial cloud revenues generating $15.2 billion, up 31% year-over-year. We continue to invest in the significant opportunity ahead to drive our long-term growth,” said CFO Amy Hood.
The pandemic has only strengthened Microsoft’s position, and the company returned $9.5 billion to shareholders through buybacks and dividends during the quarter. Microsoft launched Azure Communication Services and two new Xbox models in November this year to take advantage of the current gaming boom.
The company has appointed Christopher Young as EVP for Business Development, who will be responsible for developing global business strategies. It is important to note that Christopher Young was the CEO of cyber security pioneer McAfee, and his experience is an invaluable asset to Microsoft.
There are some obvious risks when it comes to investing in Microsoft stock, and some analysts still see Microsoft’s valuation at bubble level. Microsoft shares continue to trade in a bull market, but with a market capitalization of $1.63T, this share remains expensive for long-term investors.
Technical analysis: Microsoft shares remain in a buying zone
This stock has been on an uptrend since early April, but the price is still unable to consolidate above the $230 resistance level. The current risk/reward ratio is not good for long-term investors, but as long as the price remains above $200, this stock will remain in a “buy” zone.
Data source: tradingview.com
The critical support levels are $200 and $180, $220 and $230 represent the resistance levels. If the price jumps above $220, this would be a signal to buy Microsoft stock, but if the price falls below the $200 support level, this would be a strong “sell” signal.
Microsoft is a healthy and stable company, but with a market capitalization of 1.63T dollars, this stock is overvalued, and the current risk/reward ratio is not good for long-term investors. Microsoft reported better first quarter results than expected in October this year, with total revenue up 12% year-on-year to $31.7 billion, while first quarter EPS under GAAP was $1.82 ($0.28 more than expected). The shares of this company continue to trade in a bull market and as long as Microsoft’s price remains above the $200 support, there is no risk of a reversal in the trend.