Software giant Microsoft (MSFT) has earned plaudits for its successful pivot from desktop computing to cloud computing. And MSFT stock has risen as a result. But after a recent pullback, many investors may be wondering: Is Microsoft stock a buy right now?
Bill Gates and Paul Allen started Microsoft in 1975 at the dawn of the personal computer era to make PC operating system software. The company’s Windows operating system came to dominate the PC landscape. Microsoft expanded over the years into productivity software, server software, internet services, video games, and PC hardware and accessories.
Current Chief Executive Satya Nadella took the reins of the Redmond, Wash.-based company in 2014 and led Microsoft full steam into cloud computing.
The company’s cloud offerings today include Azure infrastructure services, Office 365 productivity software and Dynamics enterprise software. Microsoft also owns LinkedIn, Skype and GitHub.
MSFT Stock News: Metaverse Advances
Microsoft lately has been promoting the metaverse, an immersive, next-generation version of the internet. It currently makes HoloLens mixed-reality headsets for remote collaboration.
At Microsoft’s Ignite 2021 online event on Nov. 2, Microsoft showed off its latest innovations for the corporate metaverse. They include Dynamics 365 Connected Spaces and Mesh for Microsoft Teams. Microsoft stock rose 1.1% after the announcements.
On Jan. 18, Microsoft announced a deal to buy video game publisher Activision Blizzard (ATVI) for $68.7 billion in cash. Microsoft said the Activision purchase will accelerate the growth of its gaming business and provide building blocks for the metaverse. But Microsoft stock fell 2.4% on the news.
Cloud Price Increases, Windows 11
On Oct. 5, Microsoft released its Windows 11 personal computer operating system. Windows 11 features a refreshed design with a new user interface and Start menu. It also provides PC performance improvements and integrates the Teams videoconferencing app. Windows 11 is the successor to Windows 10, which came out in July 2015.
On Aug. 19, Microsoft announced the first price increases for its Microsoft 365 and Office 365 commercial cloud product suites. Microsoft stock surged 4.7% over two days on the news.
On July 14, Microsoft unveiled Windows 365, a service that brings its Windows operating system to the cloud. The commercial service streams the full Windows experience, including apps, data and settings, to PCs and other devices. It also creates a new hybrid personal computing category called Cloud PC, the company said. MSFT stock advanced 0.5% that day.
Microsoft Trails Amazon In Cloud Computing
Microsoft is gaining on Amazon.com‘s (AMZN) Amazon Web Services in the market for cloud infrastructure services.
In the third quarter, Amazon Web Services had 32% market share, according to research firm Canalys. Microsoft was in second place with 21% market share.
Other major cloud players include Alphabet (GOOGL) unit Google Cloud Platform, as well as China’s Alibaba (BABA) and Tencent (TCEHY). Overall enterprise spending on cloud infrastructure services reached $49.4 billion in the third quarter, up 35% year over year, Canalys said.
Microsoft Stock Fundamental Analysis
Late Jan. 25, Microsoft delivered a beat-and-raise report for its fiscal second quarter ended Dec. 31. Microsoft stock jumped on the news the next day.
Microsoft earned $2.48 a share on sales of $51.7 billion in the December quarter. Analysts had expected earnings of $2.32 a share on sales of $50.7 billion, according to FactSet. On a year-over-year basis, Microsoft earnings rose 22% while sales increased 20%.
For the current quarter, Microsoft expects to generate sales of $48.9 billion, based on the midpoint of its guidance. Wall Street had predicted $48.1 billion in sales for the March quarter. In the year-earlier period, it posted $41.7 billion in sales.
MSFT Stock Technical Analysis
On Oct. 18, Microsoft stock hit a buy point of 305.94 out of a flat base, according to IBD MarketSmith charts. MSFT stock notched a record high of 349.67 on Nov. 22. But it tumbled during the recent stock market correction. It ended the regular session Jan. 25 at 288.49.
Microsoft stock has a decent IBD Relative Strength Rating of 80 out of 99. The best growth stocks typically have RS Ratings of at least 80. The Relative Strength rating shows how a stock’s price performance stacks up against all other stocks over the last 52 weeks.
The IBD Stock Checkup tool gives MSFT stock an IBD Composite Rating of 83 out of 99. IBD’s Composite Rating combines five separate proprietary rankings into one easy-to-use number. The best growth stocks have a Composite Rating of 90 or better.
Microsoft ranks first out of eight stocks in IBD’s Computer Software-Desktop industry group. But the desktop software group ranks No. 182 out of 197 industry groups that IBD tracks. Choosing highly rated stocks from leading industry groups in a confirmed stock market uptrend generally increases your chances of making profits in growth stocks.
Plus, Microsoft ranked first on IBD’s list of ESG stocks for investors investors focused on environmental, social and governance issues.
Is Microsoft Stock A Buy Right Now?
Microsoft stock is not a buy right now. It needs to form a new base in the right market conditions before setting a potential buy point. Check out IBD’s Big Picture column for the current market direction.
In a negative sign, MSFT stock is trading well below its 50-day moving average line.
Also, Microsoft stock has a worst-possible IBD Accumulation/Distribution Rating of E. The rating, on an A+ to E scale, measures institutional buying and selling in a stock over the past 13 weeks. A+ signifies heavy institutional buying and E means heavy selling. A C rating is average.
Keep an eye on the overall stock market. If the market turns south, don’t try to fight the general stock market direction.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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