Software giant Microsoft stock (MSFT) has been praised for its successful transition from desktop computing to the cloud. As a result, MSFT shares rose. But after the recent pullback, many investors may be wondering: should you buy Microsoft stock right now?
Bill Gates and Paul Allen founded Microsoft in 1975, at the dawn of the personal computer era, to create software for PCs. The company’s Windows operating system began to dominate the PC market. Over the years, Microsoft stock has expanded into productivity software, server software, Internet services, video games, PC hardware, and accessories.
The current CEO, Satya Nadella, took over the Redmond, Wash.-based company in 2014 and led Microsoft into cloud computing.
The company’s cloud offerings today include Azure infrastructure services, Office 365 productivity software and Dynamics business software. Microsoft also owns LinkedIn, Skype, and GitHub.
Microsoft loses to Amazon in cloud computing
Microsoft stock beats Amazon.com (AMZN) Amazon Web Services in the cloud infrastructure services market.
Amazon Web Services had a 32% market share in the third quarter, according to research firm Canalys. Microsoft came in second with a 22% market share.
Other major cloud players include Alphabet (GOOGLE), a division of Google Cloud Platform, as well as China’s Alibaba (BABA) and Tencent (TCEHY). According to Canals, total business spending on cloud infrastructure services reached $63.1 billion in the third quarter, up 28% from the prior year.
MSFT Stock News: Activision Settlement Disputed
Recently, Microsoft has been pushing the Metaverse, an immersive version of the next generation of the Internet. The company currently produces HoloLens mixed reality headsets for remote collaboration. However, the development of HoloLens was difficult, according to the Wall Street Journal.
At the Microsoft Ignite online event in November 2021, Microsoft introduced innovations for the corporate metaverse. These include Dynamics 365 Connected Spaces and Mesh for Microsoft Teams. Microsoft shares rose 1.1% after the announcement.
At CES 2022, chipmaker Qualcomm (QCOM) announced a partnership with Microsoft to develop lightweight augmented reality glasses.
In January 2022, Microsoft announced an agreement to buy video game publisher Activision Blizzard (ATVI) for $68.7 billion in cash. Microsoft said the Activision purchase would accelerate the growth of its gaming business and provide the building blocks for the metaverse. But Microsoft shares fell 2.4% on the news.
On December 8, the Federal Trade Commission filed an antitrust lawsuit to block Microsoft’s purchase of Activision. Microsoft plans to contest the lawsuit.
Nuance acquisition, Windows 11 launch
On March 4, Microsoft completed the acquisition of Nuance Communications, a leader in speech recognition and conversational artificial intelligence software, for $19.7 billion. The acquisition of Nuance, which was announced in April 2021, will increase Microsoft’s influence in the healthcare sector.
In October 2021, Microsoft released the Windows 11 personal computer operating system. Windows 11 has an updated design with a new user interface and Start menu. It also provides a PC performance boost and integrates the Teams video conferencing app. Windows 11 is the successor to Windows 10, released in July 2015.
However, declining PC sales are putting pressure on Microsoft’s Windows business.
Fundamental analysis of Microsoft stock
Late on October 25, Microsoft reported first-quarter financial results that were above Wall Street’s target. But this guidance is much lower than the views for the December quarter. Additionally, its Azure infrastructure business grew slightly slower than expected in the September quarter.
Microsoft earned $2.35 per share on sales of $50.1 billion in the quarter ended September 30. Analysts polled by FactSet expected Microsoft to earn $2.31 per share on sales of $49.7 billion. On an annualized basis, Microsoft’s earnings grew 4% and sales 11%. Microsoft shares fell 7.7% to close at 231.32 in the next trading session.
In the current quarter, Microsoft forecasts sales of between $52.35 billion and $53.35 billion. The midpoint of $52.85 billion was well below Wall Street’s $56.2 billion target for the December quarter.
The next catalyst for Microsoft stock could be the company’s December quarter earnings report due in late January.
MSFT Stock Technical Analysis
Since hitting an all-time high of 349.67 in November 2021, Microsoft shares have been steadily declining. MSFT shares closed the regular session on December 16 at 244.69.
Microsoft stock has an unsatisfactory IBD relative strength rating of 40 out of 99. The best-growing stocks typically have an RS rating of at least 80. The relative strength rating shows how a stock’s price has built up compared to all other actions in the last 52 weeks.
The IBD Stock Checkup tool gives MSFT stocks a mediocre IBD Composite Rating of 67 out of 99. The IBD Composite Rating combines five separate private ratings into one easy-to-use number. The best growth stocks have a composite rating of 90 or higher.
Microsoft ranks first among six stocks in the IBD Computer Software-Desktop industry group. But the desktop software group ranks 182nd out of 197 industry groups tracked by IBD. Picking stocks from high-ranking industry groups in a confirmed stock market uptrend generally increases your chances of profiting from growth stocks.
Microsoft shares are part of IBD’s long-term leaders’ portfolio.
Additionally, Microsoft was ranked #1 on the 2021 IBD ESG Stock List for Investors Focused on Environment, Society and Governance.
Can you buy Microsoft shares right now?
Microsoft shares are not currently available to buy. You need to form a new base in the right market conditions before establishing a potential buy point. See the IBD Overview column for current market direction.
The positive sign is that MSFT shares have risen above their 50-day moving average. However, it is still trading below its 200-day line.
In addition, Microsoft shares have an IBD B- accumulation/distribution rating. The A+ to E rating measures the institutional buying and selling of a stock over the past 13 weeks. A+ stands for strong institutional purchases and E stands for strong sales. The C grade is average.
Follow the stock market in general. If the market turns south, don’t try to fight the general direction of the stock market.