Is Microsoft Stock a Good Option for Investors?

On Monday, Microsoft (NASDAQ:MSFT) stock rose 7.0% and closed at $160.23. At the closing price, the company’s market capitalization was $1.2 trillion. As of Monday, the stock was trading 16.0% below its 52-week high of $190.70 and 35.4% above its 52-week low of $118.38. On a YTD (year-to-date) basis, Microsoft stock has gained 1.6% as of Monday. The stock price has risen 17.8% in the trailing five-day period, while it has risen 35.9% in the trailing 12-month period.

Microsoft stock downgraded

At 10:34 AM ET today, Microsoft stock was trading 1.9% higher at $163.28. Citi analyst Walter Pritchard reduced its target price on the stock from $170 to $167 and kept a “buy” rating. According to a report from TheFly, Pritchard said, “Microsoft’s commercial business helps to buoy revenue predictability, but the company is not immune to near-term slowdown.” The analyst cut Microsoft’s fiscal 2020 earnings estimates by 3% and 2021 estimates by 7%.” Today, Piper Sandler also reduced its target price on the stock from $199 to $192.

As of Monday, 34 analysts cover Microsoft stock. Among the analysts, 32 or ~94% of the analysts recommend a “buy,” and two or ~6% recommend a “hold.” None of the analysts recommend a “sell.”

Analysts have an average target price of $189.45 on Microsoft. The target price implies a return of 18.2% based on the closing price of $160.23 on Monday. The consensus target price for the stock has fallen from $194.19 in the previous month.

Oracle (NASDAQ:ORCL) and IBM (NYSE:IBM) have average broker target prices of $49.73 and $139.56, respectively. The figures imply returns of -1.3% and 23.6%, respectively, over the next 12 months.

Growth projections

In the second quarter of fiscal 2020, which ended December 31, 2019, Microsoft reported sales of $36.9 billion—a rise of 13.7% YoY (year-over-year). The company reported sales of $32.5 billion in the second quarter of fiscal 2019. Microsoft reported an adjusted EPS of $1.51 in the second quarter of fiscal 2020 compared to $1.10 in the second quarter of fiscal 2019. Wall Street analysts expected the company to report revenues of $35.7 billion and earnings of $1.32 in the second quarter of fiscal 2020.

Wall Street analysts expect Microsoft to post sales of $34.2 billion in the third quarter of fiscal 2020. The figure would mark a rise of 12.0% YoY compared to $30.6 billion in the third quarter of fiscal 2019. Also, analysts expect the company to post an adjusted EPS of $1.30 in the third quarter of fiscal 2020 compared to $1.14 in the same period the previous year. Currently, analysts expect a 12.5% and 11.3% rise in the company’s fiscal 2020 and 2021 revenues, respectively. Meanwhile, they expect an adjusted EPS of $5.63 and $6.22 in fiscal 2020 and 2021, respectively.

Microsoft’s stock returns

Microsoft stock closed 6.0% above its 20-day moving average of $151.18 on Monday. The stock was trading 3.0% below its 50-day moving average of $165.19 and 0.3% above its 100-day moving average of $159.68. Microsoft’s 14-day MACD is 10.3, which shows an upward trading trend. With a 14-day relative strength index score of 53, the stock isn’t “oversold” or “overbought.”

Microsoft has an upper Bollinger Band level of $172.31. The company’s middle Bollinger Band level is $151.28, while its lower Bollinger Band level is $130.26. On Monday, Microsoft stock closed near its middle Bollinger Band level, which also shows that it isn’t “oversold” or “overbought.”

Microsoft’s dividend yield was 1.3% as of Monday. Read Microsoft Stock: 2 Things Investors Should Know and Is Microsoft an Attractive Dividend Stock? to learn more.