Key points:
Microsoft’s stock performance has trailed both the sector and broader indices over the last month.
While shares of the software giant saw a modest gain of 3.57%, this is well below the Computer and Technology sector’s 7.35% growth and the S&P 500’s 4.3% rise.
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This underperformance might reflect traders’ caution ahead of the company’s earnings report.
The earnings are forecasted to deliver a 3.01% rise in EPS to $3.08 and a robust revenue increase of 13.98% to $64.42 billion, driven by continued cloud adoption and enterprise software demand.
See: Chart shows bearish sentiment around Microsoft’s stock in the short term on the VT Markets app.
We turn to the charts for guidance. Microsoft closed at 409.49 USD, reflecting a decline of 1.18% in today’s session. The stock, which opened at 414.36 USD, saw a high of 416.96 USD before retreating to a low of 409.15 USD. Current price movements suggest a bearish trend, as the stock remains pressured by broader market forces.
Microsoft’s price, we see, has dipped below its key moving averages. The chart shows the 5, 10, and 30-period moving averages above the current price level, which typically indicates a downward bias in the market.
We see that this is further supported by the MACD (12, 26, 9), which shows the MACD line trending below the signal line, with negative histogram bars confirming bearish momentum.
Traders may interpret this as a sign of continued downside pressure, with the MACD crossover suggesting that there could be more room for the stock to decline in the near term.
Support is observed around the 402.76 USD level. Should the stock breach this level, it could test the psychological 400 USD mark.
On the upside, resistance can be seen near 417.00 USD, a level that has previously acted as a barrier for price advances. If the stock manages to break above this, it could signal a shift in sentiment, although the current market indicators remain cautious..
Additionally, Microsoft raises concerns for short-term traders. Recent revisions to analysts’ estimates have slightly lowered the EPS forecast by 0.01% over the past month.
These revisions are often seen as an indicator of changing sentiment regarding the company’s short-term prospects.
Microsoft’s current Forward P/E ratio of 31.92 exceeds the industry average of 29.31, suggesting that the stock may be trading at a premium. With a Forward P/E above industry levels, there is a chance that traders might become more cautious as the company approaches its earnings announcement.
It’s important to monitor how Microsoft’s stock performs with broader tech trends. The Computer – Software industry provides some positive context.
Industries ranked in the top 50% tend to outperform, and Microsoft remains one of the key players in this sector.
However, the recent shift in analyst sentiment suggests that traders may need to keep an eye on any further revisions or changes to Microsoft’s performance forecast.
Given the cautious outlook and the upcoming earnings release, traders should weigh the current valuation and premium pricing before making any moves.
If the company’s results meet or exceed the optimistic earnings forecast, we may see the stock reverse its recent decline. However, any underperformance could lead to further downward pressure.
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