Microsoft Q2 earnings preview

Microsoft is due to report Tuesday 26th January. Expectations are running high for a solid set of numbers as the cloud, personal computer and gaming businesses are supported by lockdown and WFH dynamic.

Microsoft


When?
After the closing bell on Tuesday 26th January

What to expect?
EPS of $1.64 representing a 8.6% year on year growth. Revenue is expected to come in at $40.23 billion up from $36.91 billion reported in the same quarter last year.
Microsoft has benefitted from strong demand in its cloud, personal computer and gaming business amid the covid restrictions and lockdown. Expectations on Wall Street are running high that Microsoft could beat Q2 forecasts.

Microsoft X-box series X
Q2 results come hot on the heels of 2 new Xbox gaming console releases which are expected to see strong demand. 

Azure
However, more importantly, Azure is benefitting from being one of the leaders in cloud services. Azure, the cloud platform, remains the most important driver of overall earnings & revenue growth, which is expected to remain strong, supported by remote working & WFH dynamics. 

Given the importance of the cloud business, any sign of weakness could exert strong downward pressure on the stock. Whilst momentum has tapered off slightly, a more permanent shift to WFH could well buoy demand over the coming year.

Investors will be keen to see whether growth in Azure has been strong enough to offset slower growth in Microsoft’s other key areas and on-premise server business? The broad expectation is that it has.

Of the 33 analysts that follow Microsoft 31 have buy ratings and 2 have hold ratings. The average target price is $248.19 according to FactSet data. 

Microsoft share price technical analysis
After surging 42% in 2020, Microsoft trades +2.4% so far this year. 

After a steep recovery from its mid-March low momentum has noticeably run out of steam over recent months. The share price has traded within a tight range and horizontal channel since early early November, capped by 210 on the lower band and 228 on the upper band.

The 50 & 100 sma were flat and the price hovered over them suggesting a neutral position.

Just over the last few sessions Microsoft share price has jumped higher pushing over the 50& 100 sma and it is attempting to break out of the upper band.
The RSI is supportive of more upside to come.

Strong Q2 earning could see the price break out above 228 upper band and push beyond 232 to a fresh all-time high.

Any weakness could see the bears push the share price below the lower band at $210 back towards $200 psychological level and $196. A move below this level could see the start of a bearish trend.

Learn more about trading equities


More from Microsoft

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.