Stock Market News – Microsoft earnings on tap: upbeat report could see stock challenge record high

Carol, XM Investment Research Desk

Microsoft’s earnings report for its fiscal first quarter will be made public after Wednesday’s closing bell on Wall Street. The consensus recommendation for the company is “buy”, which matches the average consensus recommendation for the Software peer group. 

Reuters’ estimates put the tech giant’s earnings per share (EPS) at $0.96 during the quarter ending in September, a forecast which has remained unchanged over the last four weeks. If bottom line results come as expected, this would translate into an increase of roughly 14.5% relative to the corresponding quarter from last year when the corporation earned $0.84 per share. In the meantime, analysts’ EPS forecasts range from $0.93 to $1.04. Microsoft has a track record of exceeding analysts’ earnings projections; it has done so in all four previously reported quarters.

Revenue growth is also of importance for stock price movement and will thus also be closely watched as the data hit the markets. In this respect, revenues are anticipated at $27.9 billion during the quarter, 13.7% above last year’s respective number. Growth in areas which are viewed as instrumental for the firm’s long-term plans will be attracting additional attention, having greater potential to move the share price in either direction. One such area is the Azure cloud computing service which has managed to experience phenomenal expansion.

Taking a technical look at Microsoft’s stock, the sideways moving RSI in recent days is pointing to a neutral short-term picture. In the medium-term, price action taking place between the 50- and 100-day moving average lines, as well as the roughly flat 50-day MA, also suggest a tilt towards neutrality. A move above the 50-day MA is likely to reinstate the bullish outlook, with the shares eyeing a fresh record high.

In terms of potential key levels: an encouraging report that spurs buying interest for Microsoft’s stock may see the price meeting resistance around the current level of the 50-day MA at 110.74; the region around this point also encapsulates a couple of tops from the recent past at $111.15 and $112.78. Higher still, the all-time high of $116.18 would be eyed. Conversely, immediate support to a falling stock on the back of a disappointing release could occur around the 100-day MA at $107.14; the zone around this mark captures two bottoms from previous weeks at $105.78 and $107.23. Not far below lies the three-month low of $104.20 hit on October 11, while steeper losses would bring into scope the $100 round figure that may be of psychological importance.

As evidenced from the chart above, Microsoft is handily outperforming Wall Street’s major indices in 2018, while it also bears mention that it is the third best performer within the Dow Jones Industrial Average, behind Apple (+30.38% year-to-date) and Merck & Co (+28.97%).

This is a busy earnings-week, with the likes of Amazon, Google-parent Alphabet and Intel releasing quarterly results on Thursday. Traders may use Microsoft’s data to speculate as regards how these other companies’ results would come out. In other words, upbeat data by Microsoft could lift the share prices of these other tech heavyweights – more broadly the tech sector –, with the opposite holding true in the event of discouraging numbers.