Microsoft Stock Price Forecast October 2021 – Time to Buy MSFT Stocks?
As tech names hit their 2021 highs. Microsoft (MSFT) stock has been strong and hit a new high on Friday. The stock rose more than 42% for the year and its market capitalization is $ 2.32 trillion, which is only a little short of Apple, the world’s largest company in terms market capitalization.
Meanwhile, investors are wondering what the outlook is for Microsoft stock after the steep rise in 2021. Will the stock continue to rise or could there be a correction?
Technical analysis of MSFT shares
MSFT stock looks bullish on the charts. The stock is trading above all key moving averages as it is trading near all-time highs. Earlier this month, the stock broke the 50-day SMA (simple moving average). It has since been in an uptrend and has hit higher highs. The 12.26 MACD (moving average convergence difference) also gives a buy signal for Microsoft stock. The 14-day RSI (Relative Strength Index), which currently sits at 64.4, is a neutral indicator.
Third Quarter Results Season
Microsoft would release its first quarter tax results tomorrow. Notably, a third of the components of the S&P 500 and the Dow Jones publish their quarterly earnings this week. Besides Microsoft, other tech giants like Apple, Amazon, Alphabet and Facebook have also scheduled their earnings for this week. The earnings season has been quite good so far and the majority of companies have posted better than expected earnings. However, the markets would be particularly interested in the revenues of the tech giants. Not only their action on prices, but the profits of the tech giants also have an impact on the markets at large.
Analysts polled by TIKR expect Microsoft to report revenue of $ 43.9 billion in the quarter, an increase of 18.4% year-on-year. The company’s profit growth is expected to drop to around 13.5% over the next two quarters. MSFT’s adjusted EPS is expected to increase 14.2% to $ 2.08 in the quarter.
Meanwhile, the global chip shortage situation could also impact Microsoft’s profits. PC shipments have been affected as PC makers do not have enough chips to meet demand. Intel now expects the chip shortage situation to extend into 2023 as well. That said, thanks to Microsoft’s diversified business model, profits would not be too impacted by the negative impact on the PC market. . The company has a thriving cloud business. LinkedIn is also a major contributor to company profits.
MSFT Share Price Forecast
Most Wall Street analysts are bullish on Microsoft stocks. Of the 36 analysts who cover the stock, 33 rate it as a buy or equivalent while the other three analysts rate it as an expectation. None of the analysts rate MSFT stock as a sell.
Its median target price of $ 331 implies a 7% rise from current levels. The highest target stock price of $ 384 is a 24% premium while the lowest target price of $ 280 is a 9.4% discount.
Last week, Morgan stanley reiterated the MSFT share as overweighted while underlining the momentum of the share before the publication of the results. “Outperforming revenues may turn out to be more sustainable operating margins than feared, leading to higher EPS. Our model suggests sustainable growth of BPA in adolescents, ”he said in his note. The brokerage also considers Microsoft’s valuations to be “reasonable.”
Microsoft stock valuation
MSFT stock is now trading at an NTM PE (next 12 months) of 35x. The multiples have averaged 27x over the past five years and 20.6x over the past 10 years. The valuation premium reflects the change in perception of the company. After primarily selling Windows and Office products, Microsoft has now established itself in several leading markets.
The company’s valuation multiples have increased significantly under the leadership of Nadella, who has positioned the company as a technology and software company with a focus on high growth industries.
Long-term MSFT stock forecast
MSFT is one of the beneficiaries of digital transformation. The demand for PCs, which has been sluggish for years, has peaked in the past year. In addition, the backbone to cloud and AI would support the company’s long-term profits as well as its valuation. The company also announced a new $ 60 billion share buyback program that would help it increase EPS by reducing the number of shares outstanding.
Overall, despite the recent spike in MSFT stock, it remains one of the best ways to play digital transformation. The stock should continue to generate strong returns over the medium to long term as it expands into high growth emerging sectors.