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Microsoft Gears Up for Earnings After the Bell: ETFs in Focus
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Microsoft (MSFT - Free Report) is set to release fourth-quarter 2024 results today after market close. It is worth taking a look at this leading software company’s fundamentals ahead of its results.
Microsoft has been caught in a spree of heavy technology sector sell-off in recent weeks. However, the stock has risen about 10% over the past week, outperforming the industry’s average growth of 6.9%. The solid trend is likely to continue, given that the software maker has a reasonable chance of beating estimates in the reported quarter. As such, ETFs having double-digit exposure to this software leader are currently in focus (read: Should You Buy the Dip in "Mag 7" and Big Tech ETFs?).
These are Select Sector SPDR Technology ETF (XLK - Free Report) , MSCI Information Technology Index ETF (FTEC - Free Report) , iShares Global Tech ETF (IXN - Free Report) , Vanguard Information Technology ETF (VGT - Free Report) and iShares Dow Jones US Technology ETF (IYW - Free Report) .
Earnings Whispers
Microsoft has an Earnings ESP of +1.08% and a Zacks Rank #3 (Hold). According to our methodology, the combination of a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
This software maker witnessed no earnings estimate revision over the past 30 days for the fourth quarter of fiscal 2024. Microsoft’s earnings surprise history is good, as it delivered an earnings surprise of 7.38%, on average, in the last four quarters. The company is expected to post substantial earnings of 7.8% and revenue growth of 14.2% for the to-be-reported quarter.
Microsoft currently has an average brokerage recommendation (ABR) of 1.13 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell etc.) made by 39 brokerage firms. Of the 39 recommendations deriving the current ABR, 35 are Strong Buy and three are Buy. Strong Buy and Buy, respectively, account for 89.74% and 7.69% of all recommendations. The ABR has not changed from a month ago.
Based on short-term price targets offered by 35 analysts, the average price target for Microsoft comes to $501.00. The forecasts range from a low of $375.00 to a high of $600.00.
MSFT has a solid Growth and Momentum Score of B each but falls under a bottom-ranked Zacks industry (bottom 37%). At current levels, Microsoft's stock trades at 32.3X forward earnings, a premium to the Zacks Computer-Software industry average of 29.9X.
What’s Hot?
Investors are closely watching the signs of whether the massive wave of AI investment by MSFT has started to pay off. According to UBS Global Research, Microsoft has been grabbing more market share from Google (GOOGL) and Amazon (AMZN).
The world's largest software has benefited most from the rapid deployment of generative AI (GenAI) thanks to its collaboration with OpenAI. About 65% of Fortune 500 companies are using the Azure service that delivers OpenAI's technology to businesses. Demand for generative AI will continue to fuel Microsoft's cloud business.
Microsoft is now emphasizing AI transformation through its new offerings like Microsoft Copilot. “Microsoft Copilot and Copilot stack are orchestrating a new era of AI transformation, driving better business outcomes across every role and industry," Nadella said.
Microsoft expects revenues of $63.5-$64.5 billion for the fiscal fourth-quarter 2024.
Select Sector SPDR Technology ETF is the most popular and liquid ETF in the technology space, with AUM of $66.3 billion and an average daily volume of 5 million shares. It offers broad exposure to the technology sector and follows the Technology Select Sector Index. Select Sector SPDR Technology ETF holds about 67 securities in its basket, with Microsoft occupying the top position at 22.1%.
MSCI Information Technology Index ETF is home to 297 technology stocks with AUM of $11.2 billion. It follows the MSCI USA IMI Information Technology Index. Microsoft is the top firm with a 16.6% allocation.
MSCI Information Technology Index ETF has 0.08% in expense ratio, while volume is solid at 334,000 shares a day. It carries a Zacks ETF Rank #1 with a Medium risk outlook.
iShares Global Tech ETF provides exposure to electronics, computer software and hardware, and informational technology companies by tracking the S&P Global 1200 Information Technology 4.5/22.5/45 Capped Index. Holding 118 stocks in its basket, Microsoft occupies the top spot with an 18.3% share (read: Worried About Tech Selloff? ETF Strategies to Play).
iShares Global Tech ETF has amassed $4.8 billion in its asset base and trades in a good volume of 196,000 shares a day, on average. The expense ratio is 0.41%.
Vanguard Information Technology ETF manages about $72.6 billion in its asset base and provides exposure to 320 technology stocks. It currently tracks the MSCI US Investable Market Information Technology 25/50 Index. Here, MSFT occupies the top position with a 16.6% share.
Vanguard Information Technology ETF has an expense ratio of 0.10%, while volume is solid at nearly 476,000 shares. It has a Zacks ETF Rank #1 with a Medium risk outlook.
iShares U.S. Technology ETF provides exposure to U.S. electronics, computer software and hardware, and informational technology companies. It tracks the Russell 1000 Technology RIC 22.5/45 Capped Index, holding 140 securities in its basket. Of these, Microsoft occupies the second position in the basket, with 15.6% of the assets.
iShares Dow Jones US Technology ETF has AUM of $18.2 billion and charges 40 bps in fees and expenses. Volume is good as it exchanges nearly 810,000 shares a day. IYW has a Zacks ETF Rank #1 with a Medium risk outlook.
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Microsoft Gears Up for Earnings After the Bell: ETFs in Focus
Microsoft (MSFT - Free Report) is set to release fourth-quarter 2024 results today after market close. It is worth taking a look at this leading software company’s fundamentals ahead of its results.
Microsoft has been caught in a spree of heavy technology sector sell-off in recent weeks. However, the stock has risen about 10% over the past week, outperforming the industry’s average growth of 6.9%. The solid trend is likely to continue, given that the software maker has a reasonable chance of beating estimates in the reported quarter. As such, ETFs having double-digit exposure to this software leader are currently in focus (read: Should You Buy the Dip in "Mag 7" and Big Tech ETFs?).
These are Select Sector SPDR Technology ETF (XLK - Free Report) , MSCI Information Technology Index ETF (FTEC - Free Report) , iShares Global Tech ETF (IXN - Free Report) , Vanguard Information Technology ETF (VGT - Free Report) and iShares Dow Jones US Technology ETF (IYW - Free Report) .
Earnings Whispers
Microsoft has an Earnings ESP of +1.08% and a Zacks Rank #3 (Hold). According to our methodology, the combination of a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
This software maker witnessed no earnings estimate revision over the past 30 days for the fourth quarter of fiscal 2024. Microsoft’s earnings surprise history is good, as it delivered an earnings surprise of 7.38%, on average, in the last four quarters. The company is expected to post substantial earnings of 7.8% and revenue growth of 14.2% for the to-be-reported quarter.
Microsoft currently has an average brokerage recommendation (ABR) of 1.13 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell etc.) made by 39 brokerage firms. Of the 39 recommendations deriving the current ABR, 35 are Strong Buy and three are Buy. Strong Buy and Buy, respectively, account for 89.74% and 7.69% of all recommendations. The ABR has not changed from a month ago.
Based on short-term price targets offered by 35 analysts, the average price target for Microsoft comes to $501.00. The forecasts range from a low of $375.00 to a high of $600.00.
MSFT has a solid Growth and Momentum Score of B each but falls under a bottom-ranked Zacks industry (bottom 37%). At current levels, Microsoft's stock trades at 32.3X forward earnings, a premium to the Zacks Computer-Software industry average of 29.9X.
What’s Hot?
Investors are closely watching the signs of whether the massive wave of AI investment by MSFT has started to pay off. According to UBS Global Research, Microsoft has been grabbing more market share from Google (GOOGL) and Amazon (AMZN).
The world's largest software has benefited most from the rapid deployment of generative AI (GenAI) thanks to its collaboration with OpenAI. About 65% of Fortune 500 companies are using the Azure service that delivers OpenAI's technology to businesses. Demand for generative AI will continue to fuel Microsoft's cloud business.
Microsoft is now emphasizing AI transformation through its new offerings like Microsoft Copilot. “Microsoft Copilot and Copilot stack are orchestrating a new era of AI transformation, driving better business outcomes across every role and industry," Nadella said.
Microsoft expects revenues of $63.5-$64.5 billion for the fiscal fourth-quarter 2024.
ETFs in Focus
Select Sector SPDR Technology ETF (XLK - Free Report)
Select Sector SPDR Technology ETF is the most popular and liquid ETF in the technology space, with AUM of $66.3 billion and an average daily volume of 5 million shares. It offers broad exposure to the technology sector and follows the Technology Select Sector Index. Select Sector SPDR Technology ETF holds about 67 securities in its basket, with Microsoft occupying the top position at 22.1%.
Select Sector SPDR Technology ETF charges 9 bps in fees per year from investors and has a Zacks ETF Rank #1 with a Medium risk outlook (read: 5 ETFs to Bet On Amid Tech-Driven Market Sell-Off).
MSCI Information Technology Index ETF (FTEC - Free Report)
MSCI Information Technology Index ETF is home to 297 technology stocks with AUM of $11.2 billion. It follows the MSCI USA IMI Information Technology Index. Microsoft is the top firm with a 16.6% allocation.
MSCI Information Technology Index ETF has 0.08% in expense ratio, while volume is solid at 334,000 shares a day. It carries a Zacks ETF Rank #1 with a Medium risk outlook.
iShares Global Tech ETF (IXN - Free Report)
iShares Global Tech ETF provides exposure to electronics, computer software and hardware, and informational technology companies by tracking the S&P Global 1200 Information Technology 4.5/22.5/45 Capped Index. Holding 118 stocks in its basket, Microsoft occupies the top spot with an 18.3% share (read: Worried About Tech Selloff? ETF Strategies to Play).
iShares Global Tech ETF has amassed $4.8 billion in its asset base and trades in a good volume of 196,000 shares a day, on average. The expense ratio is 0.41%.
Vanguard Information Technology ETF (VGT - Free Report)
Vanguard Information Technology ETF manages about $72.6 billion in its asset base and provides exposure to 320 technology stocks. It currently tracks the MSCI US Investable Market Information Technology 25/50 Index. Here, MSFT occupies the top position with a 16.6% share.
Vanguard Information Technology ETF has an expense ratio of 0.10%, while volume is solid at nearly 476,000 shares. It has a Zacks ETF Rank #1 with a Medium risk outlook.
iShares U.S. Technology ETF (IYW - Free Report)
iShares U.S. Technology ETF provides exposure to U.S. electronics, computer software and hardware, and informational technology companies. It tracks the Russell 1000 Technology RIC 22.5/45 Capped Index, holding 140 securities in its basket. Of these, Microsoft occupies the second position in the basket, with 15.6% of the assets.
iShares Dow Jones US Technology ETF has AUM of $18.2 billion and charges 40 bps in fees and expenses. Volume is good as it exchanges nearly 810,000 shares a day. IYW has a Zacks ETF Rank #1 with a Medium risk outlook.