Microsoft (NASDAQ: MSFT) stock has advanced from $204 above $223 in less than several weeks and the current price stands around $213. Microsoft has found strong support above $200 but the price is still not able to surpass $230 resistance.Fundamental analysis: The pandemic has only solidified the position of Microsoft further
Even with the COVID-19 pandemic, the business of Microsoft is going well and the company will have a rise in revenue for the next fiscal year. Microsoft launched Azure Communication Services recently that will compete with Twilio and Amazon.
This service allows developers to add video, voice, chat, and text messaging across applications, websites, and mobile platforms. Microsoft is most certainly a great company and the pandemic has only solidified its position further.
Microsoft will release Q1 earnings results on Tuesday, October 27th, after the market close. The consensus EPS estimate is $1.55 (+12.3% Y/Y) and the consensus Revenue Estimate is $35.78B (+8.1% Y/Y) which is very good.
Microsoft has been growing dividends since 2006 and investors can expect a 10% dividend increase. Despite this, my opinion is that Microsoft is currently overvalued and the main drivers of Microsoft’s recent capitalization growth are external.
With a $1.59T market capitalization, this stock is expensive and represents opportunity only for short-term traders. Profitability ratios also confirm this, P/E is above 30 which confirms that Microsoft stock price is expensive.
There are some obvious risks when it comes to trading this stock currently but Microsoft’s stability and size will always attracting potential investors and traders.
The attention of investors is also focused on the US stimulus aid package negotiations and the upcoming presidential elections. The US presidential elections will be on November 3 and according to the polls, US President Trump’s rival, Joe Biden, leads.Technical analysis: Bulls are focused on breaking the resistance level at $220Data source: tradingview.com
On this chart, I marked important resistance and support levels. The important support levels are $200 and $190, $220 and $230 represent the resistance levels.
As long the price is above $200 support this stock is in the “buy” zone and there is no indication of the trend reversal. If the price falls on this support and if we get a “bullish” confirmation candle it would be a very good entry point for short-term traders who are trading Microsoft stocks with “stop-loss” and “take profit” orders.
Rising above $230 supports the continuation of the bullish trend for Microsoft and the next price target could be located around 250. On the other side, if the price falls below $200 it would be a strong “sell” signal and we have the open way to $190.Summary
Fund managers have a buy rating on Microsoft stock and a price objective of $260 which is a little optimistic in my opinion. Even with the COVID-19 pandemic, the business of Microsoft is going well and the company will release Q1 earnings results on October 27th. Microsoft’s valuation is currently at a nearly 20-year high and as long the price of MSFT is above $200 this stock is in the “buy” zone.
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