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Should Investors Buy Microsoft's Stock Ahead of Earnings?
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Quarterly results from Microsoft (MSFT - Free Report) will be a highlight of this week’s earnings lineup as investors continue to gauge how big tech companies are fairing amid easing inflation.
Reporting its fiscal fourth quarter results after market hours on Tuesday, July 30, let’s see if it's time to buy Microsoft’s stock.
Microsoft's Q4 Expectations
Led by Azure, Microsoft’s growth has been fueled by its cloud services with Q4 sales expected to rise 14% to $64.19 billion versus $56.19 billion in the comparative quarter.
As a cloud computing platform, Azure has continued to take market share by gaining an edge with customers looking to build their own AI solutions. Strengthening Microsoft’s artificial intelligence offerings has been its strategic partnership with ChapGPT creator OpenAI. In addition to this, chips from AMD (AMD - Free Report) and its magnificent seven peer Nvidia (NVDA - Free Report) have further diversified Microsoft’s AI accelerators.
Microsoft’s Q4 EPS is thought to have increased 8% to $2.90 compared to $2.69 per share a year ago. Furthermore, Microsoft has surpassed bottom-line expectations for seven consecutive quarters posting an average earnings surprise of 7.38% in its last four quarterly reports.
Image Source: Zacks Investment Research
YTD Performance
Year to date, Microsoft's stock is up a respectable +13% which has slightly trailed the broader indexes and most of its magnificent seven peers including Nvidia. Still, this performance has been roughly on par with Apple (AAPL - Free Report) and has topped Tesla’s (TSLA - Free Report) -7%.
Image Source: Zacks Investment Research
Monitoring Microsoft’s Valuation
At current levels, Microsoft's stock trades at 32.2X forward earnings and at a premium to the S&P 500’s 22.9X but beneath its Zacks Computer-Software industry average of 35.1X.
Microsoft also trades beneath its decade-long high of 38.2X forward earnings but above the median of 26.3X.
Image Source: Zacks Investment Research
Bottom Line
Ahead of its Q4 report, Microsoft’s stock lands a Zacks Rank #3 (Hold). Reaching or exceeding quarterly expectations may be crucial to more upside in Microsoft’s stock as its valuation does allude to the notion that there could be better buying opportunities ahead. However, the tech giant’s growth trajectory remains attractive and Microsoft should continue to reward long-term investors.
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Should Investors Buy Microsoft's Stock Ahead of Earnings?
Quarterly results from Microsoft (MSFT - Free Report) will be a highlight of this week’s earnings lineup as investors continue to gauge how big tech companies are fairing amid easing inflation.
Reporting its fiscal fourth quarter results after market hours on Tuesday, July 30, let’s see if it's time to buy Microsoft’s stock.
Microsoft's Q4 Expectations
Led by Azure, Microsoft’s growth has been fueled by its cloud services with Q4 sales expected to rise 14% to $64.19 billion versus $56.19 billion in the comparative quarter.
As a cloud computing platform, Azure has continued to take market share by gaining an edge with customers looking to build their own AI solutions. Strengthening Microsoft’s artificial intelligence offerings has been its strategic partnership with ChapGPT creator OpenAI. In addition to this, chips from AMD (AMD - Free Report) and its magnificent seven peer Nvidia (NVDA - Free Report) have further diversified Microsoft’s AI accelerators.
Microsoft’s Q4 EPS is thought to have increased 8% to $2.90 compared to $2.69 per share a year ago. Furthermore, Microsoft has surpassed bottom-line expectations for seven consecutive quarters posting an average earnings surprise of 7.38% in its last four quarterly reports.
Image Source: Zacks Investment Research
YTD Performance
Year to date, Microsoft's stock is up a respectable +13% which has slightly trailed the broader indexes and most of its magnificent seven peers including Nvidia. Still, this performance has been roughly on par with Apple (AAPL - Free Report) and has topped Tesla’s (TSLA - Free Report) -7%.
Image Source: Zacks Investment Research
Monitoring Microsoft’s Valuation
At current levels, Microsoft's stock trades at 32.2X forward earnings and at a premium to the S&P 500’s 22.9X but beneath its Zacks Computer-Software industry average of 35.1X.
Microsoft also trades beneath its decade-long high of 38.2X forward earnings but above the median of 26.3X.
Image Source: Zacks Investment Research
Bottom Line
Ahead of its Q4 report, Microsoft’s stock lands a Zacks Rank #3 (Hold). Reaching or exceeding quarterly expectations may be crucial to more upside in Microsoft’s stock as its valuation does allude to the notion that there could be better buying opportunities ahead. However, the tech giant’s growth trajectory remains attractive and Microsoft should continue to reward long-term investors.