Microsoft Corporation develops, manufactures, licenses, sells, and supports software products. The company offers operating system software, server application software, business and consumer applications software, software development tools, and Internet and intranet software. Microsoft also develops video game consoles and digital music entertainment devices.
Fundamentally, Microsoft is a global market leader in software technology, specifically in cloud computing. The company has demonstrated strong growth in the cloud business particularly as global corporations embrace hybrid work structures. The company remains well-positioned to benefit from the secular trends driving higher technology demand, including but not limited to, artificial intelligence (AI) and its related technologies.
Technically, a recent break above a significant resistance level, as depicted by the black dotted trendline on the main chart, is a compelling reason to consider the stock as an investment opportunity. Usually, a price increase occurs after such a break. The breached resistance level becomes a support zone as the price retraces and tests the level before continuing to rise further (see the insert). The resistance becomes support now. The trade idea is tactical in nature—intended to take advantage of short-term market movements.
Upside price momentum regained some strength according to the Moving Average Convergence Divergence (MACD) indicator, which supports the bullish bias.
We suggest a low at-risk allocation for this trade and apply a medium technical rating to this analysis. Increase some exposure for a breakup out of the ascending triangle pattern or a break above $263.00.
Microsoft can also be accessed via the JSE-listed ETNs, MSETNC and MSETNQ.
Share Information
| Share code | MSFT US, MSETNC, MSETNQ |
|---|---|
| Industry | Software & Services |
| Market capatalisation (USD) | 2055.98 billion |
| One year total return | -5.51% |
| Return year-to-date | 15.46% |
| Current price(USD) | 276.20 |
| 52 weeek high(USD) | 315.95 |
| 52 week low(USD) | 213.43 |
| Financial year end | June |
| Closing paragraph | Testing its 200-day simple moving average may indicate the stock is finding support at this key level and may continue to rise. At a Beta of 1.2, the stock is 20% more volatile than the overall market. Expect moderate-to-high fluctuations going forward. |
Consensus expectations
(Bloomberg)
| FY22 | FY23E | FY24E | FY25E | |
|---|---|---|---|---|
| Headline Earnings per Share (USD) | 9.21 | 9.36 | 10.76 | 12.43 |
| Growth (%) | - | 1.62 | 14.95 | 15.58 |
| Dividend Per Share (USD) | 2.48 | 2.61 | 2.79 | 3.08 |
| Growth (%) | - | 5.20 | 6.82 | 10.48 |
| Forward PE (times) | - | 29.51 | 25.67 | 22.21 |
| Forward Dividend Yield (%) | - | 0.94 | 1.01 | 1.11 |
| Closing paragraph | Robust double-digit earnings growth is expected over the medium term, as the company recovers from weakness in the face of tighter economic conditions that hampered growth stocks in general. | |||
Buy or Sell Rationale
Technical Analysis :
Long term fundamental view:
| Share Name and position | BDRY - BUY (Continue to hold) | XLK - BUY (Continue to hold) | ATVI - BUY (Continue to hold) |
|---|---|---|---|
| Entry | 9.05 | 139.66 | 77.71 |
| Current | 9.98 | 143.66 | 79.87 |
| Movement | 10.3% | 2.9% | 2.8% |
| Summary text |
The stock is in an accumulation phase and is testing its 200-day simple moving average. Upside price momentum supports the bullish trend.
The take profit target is set at $12.00 with a trailing stop-loss at $8.75. We plan to exit the position around 21 June 2023. |
The price is currently testing the upper range of a declining channel pattern. The ETF has managed to stay above its 200-day simple moving average and is currently testing its 50% Fibonacci retracement level. This is indicative of upside price momentum and supports the bullish trend.
Our take profit target is set at $156.00 with a trailing stop-loss at $137.00. We plan to exit the position around 24 May 2023. |
The price is forming a symmetrical triangle pattern and is currently trading above its 200-day simple moving average. Upside price momentum supports the bullish trend.
Our take profit target is set at $84.00 with a trailing stop-loss at $77.00. Exit the position around 30 June 2023. |
| Share Name and position | AAPL - BUY (Continue to hold) | EXR - BUY (Continue to hold) | KR - BUY (Continue to hold) |
|---|---|---|---|
| Entry | 153.71 | 157.83 | 46.91 |
| Current | 155.85 | 159.96 | 47.13 |
| Movement | 1.4% | 1.3% | 0.5% |
| Summary text |
The stock is currently retracing from the lower range of a linear regression channel pattern. Remains above its 200-day simple moving average. Upside price momentum supports the bullish trend.
Our take profit target is set at $170.00, with a trailing stop-loss at 147.00. We plan to exit the position around 16 June 2023. |
The price appears to be retracing from the lower range of a linear regression channel pattern. The stock is testing its 200-day simple moving average, with resurgent upside momentum indicating strengthening of the bullish trend.
Our take profit target is set at $180.00 with a trailing stop-loss at $150.00. Exit the position around 3 May 2023. |
The price remains above its key support level, above its 200-day simple moving average. The bullish trend is supported by upside price momentum.
Our take profit target remains at $52.00 with a trailing stop-loss at $45.00. We plan to exit the position on 7 June 2023. |
