Microsoft stock forecast: Unanimous ‘buy’ for MSFT?
The downtrend that started back in November has pushed the value of Microsoft (MSFT) stock to its lowest level since January 2021 as the global macroeconomic backdrop has kept deteriorating.
The hawkish actions taken by the US Federal Reserve (Fed) has raised fear levels among market participants that the country could soon enter a recessionary cycle.
In this regard, a model created by The Conference Board and published in early October indicated that the odds of a recession have spiked to 96% in the US.
Can the latest decline in the Microsoft stock value be considered an opportunity to grab some shares of the tech company at a lower price?
In this article, we share further details about this tech company, including the latest news and what the most relevant drivers are for its stock price to draft a plausible Microsoft share price forecast.
Microsoft (MSFT) live chart
What is Microsoft (MSFT)?
Founded in 1975 by Bill Gates and Paul Allen, Microsoft is one of the world’s most valuable and successful technology companies.
The firm, perhaps best known for its flagship Windows product, is now highly concentrated on cloud technology, with the Intelligent Cloud segment accounting for 41% of top line as of the first quarter of the 2023 fiscal year.
This is a summary of the company’s three core business segments:
Productivity and Business Processes: includes all revenues generated by the company’s software such as Office 365, Microsoft Teams, and some of its web acquisitions like LinkedIn.
Intelligent Cloud: includes Microsoft’s server products and enterprise services via its Azure cloud-storage solution.
More Personal Computing: includes Microsoft’s Windows revenues and income generated by its gaming and web search divisions.
During Q1 2023, the firm produced total revenues of $50.12bn. Its CEO is Satya Nadella. As of 30 June, the company employed approximately 221,000 workers worldwide.
Microsoft went public in 1986. The stock is listed on the Nasdaq stock exchange under the ticker symbol MSFT. In the past 10 years, Microsoft stock has delivered gains of 1,020.9%. During that same period, the Nasdaq 100 (US100) and S&P 500 (US500) index generated gains of 339.5% and 181.3%, respectively.
Microsoft stock price history and technical analysis
As of 12 December, Microsoft stock has dropped by nearly 25% to $252.2 a share.
Even though market participants are still concerned that the Fed’s actions may not be sufficient to keep inflation in check, there have been signs that price pressures may be diminishing as energy prices have declined in the past couple of months.
November was a positive year for the stock of the tech giant as the price advanced by nearly 10% on the back of these hopes.
As a result, Microsoft stock is now sitting just 4.3% below its 200-day simple moving average (MA).
As of 13 December, the price action remains on a downtrend as indicated in the chart above, with the price making multiple consecutive lower highs and lower lows since November. However, technical indicators may be starting to send signals of an upcoming u-turn in the value of MSFT stock.
Both the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) made higher lows in early October and mid-November despite the price dropping to lower levels. This phenomenon is commonly known as a bullish divergence and is often interpreted as a signal that the price may have bottomed in the short term.
Moving forward, the 200-day SMA remains the most relevant resistance to overcome followed by the $295 horizontal resistance. If Microsoft stock manages to make its first higher high before the year ends, this could be another indication that the stock may have hit a temporary bottom and could favour a short-term bullish Microsoft stock forecast.
Key drivers and latest news to consider to draft a Microsoft stock projection
On 8 December, the US Federal Trade Commission (FTC) moved to block Microsoft’s acquisition of Activision Blizzard, citing that the transaction would “enable Microsoft to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content and cloud-gaming business”.
Shortly after the FTC’s announcement, analyst Dan Romanoff from Morningstar commented:
Meanwhile, analysts from other financial institutions believe that the deal will encounter opposition in other relevant jurisdictions as well.
“We believe FTC's complaint significantly raises the likelihood of the deal's failing to gain regulatory approval in the US, UK, and EU in the next six months”, analysts Martin Yang and Andrew Northcutt from Oppenheimer stated in a note sent to clients.
Market chatter indicated that Microsoft moved to offer Sony the right to include one of Activision’s most popular video games, Call of Duty, as part of its gaming subscription service in a move that may seek to ease regulators’ concerns about the acquisition.
Microsoft fundamental analysis: Latest earnings
On 25 October, Microsoft reported its financial results covering the first quarter of the 2023 fiscal year. Total revenues during the three months ended 30 September landed at $50.1bn, resulting in a 16% year-over-year (YOY) increase on a constant-currency basis.
The company’s Intelligent Cloud segment was the best performer as sales experienced a 20.2% jump in the same period a year ago. Next best was the Productivity and Business Processes segment, which experienced a 9.5% YOY jump.
Gross margins experienced a slight 72 basis point decline compared to a year ago, landing at 69.2%, while the company’s GAAP operating income rose by 6.3% to $21.52bn. The company’s GAAP net income finished the year 14.4% lower at $16.56bn, while earnings per share dropped by 13.3% to $2.35.
Microsoft’s long-term debt by the end of this quarter ended at $45.37bn. Total cash, equivalents and short-term investments ended at $107.26bn. Microsoft pays a quarterly dividend of $0.68 a share. This results in an annualised dividend of $2.72 for a 1% dividend yield as of 12 December.
Microsoft stock forecast: analysts’ predictions & commentary
The average MSFT stock forecast for the next 12 months was $3,006.4.61 a share, implying a 19.1% upside potential based on the 12 December closing price of $252.51.
The highest prediction was at $411 a share and the lowest $234.
Wallet Investor held a neutral-to-bullish short-term outlook for Microsoft stock based on an analysis of multiple technical indicators. For the next 14 days, the baseline estimate for Microsoft future stock price ranged between $249.90 and $257.42.
The following are the algorithm’s baseline CSL stock predictions for the next one to three years.
Microsoft stock forecast 2023: $302.7
Microsoft stock forecast 2025: $402.6
Note that algorithm-based predictions can be wrong. Past performance is no guarantee of future returns. Always conduct your own analysis before trading. And never trade money that you cannot afford to lose.
Is Microsoft a good stock to buy
As of 13 December, 30 out of 33 analysts surveyed by MarketBeat rated the stock a ‘buy’. However, these opinions should not be considered a recommendation to invest or trade Microsoft stock. Many factors not accounted for in these predictions could affect the actual performance of MSFT. Always conduct your own analysis before trading.
Will Microsoft stock go up or down?
No-one can say for sure. According to estimates from the third-party forecasting service Wallet Investor (as of 13 December), the price of Microsoft could go up in the mid and long terms.
However, these forecasts can be wrong and have been inaccurate in the past. Always do your own research before making any investment decisions. And never invest more money than you can afford to lose.
Should I invest in Microsoft stock?
The decision to invest in any financial asset should only be made after the investor has assessed the instrument’s prospects and risks along with his/her individual risk tolerance and financial goals. Different strategies will suit different investment goals with short or long-term focus. You should do your own research. Remember that past performance is no guarantee of future success. And never invest money you cannot afford to lose.