Microsoft (NASDAQ: MSFT) needs no introduction. After all, it's the second largest company in the world, only behind Apple (NASDAQ: AAPL), boasting a staggering market capitalization of $2.36 trillion.
It might not come as a surprise that even though the shares of Microsoft are already up an impressive 31.72% year-to-date, analysts see further upside for the tech titan.
The company has certainly earned its place on the Top-Rated Stocks list, comprising 100 companies that have garnered the most favorable average ratings from equity research analysts over the past year. Additionally, Microsoft stands out as one of the Most-Upgraded stocks, signifying that Wall Street analysts have consistently raised their outlook on the company's performance in the preceding 90 days.
So, as the fourth quarter gets underway, with shares of MSFT currently trading steadily below its all-time high set in July, is now the time to invest? Well, let’s see what analysts and the technical analysis suggest.
Analysts See Double-Digit Upside
As previously mentioned, MSFT stands out now as one of the most upgraded stocks. Given its already impressive performance YTD, helped by its previous earnings that topped estimates and projected earnings growth of 13.95%, it's understandable why analysts have remained bullish.
MSFT currently has a Moderate Buy rating based on thirty-eight analyst ratings. Five of the thirty-eight analyst ratings have the stocks at Hold, and thirty-three have it as a Buy. Impressively, the consensus analyst price target of $376.34 calls for almost 18% upside. The consensus price target for MSFT has steadily and consistently increased month over month since the beginning of the year.
A Snapshot of Microsoft’s Earnings
Microsoft announced $2.69 per share earnings in its most recent quarterly earnings report, surpassing the consensus estimate of $2.55 by $0.14. The company's quarterly revenue was $56.19 billion, exceeding the consensus estimate of $55.49 billion, marking an 8.3% increase compared to the same period last year.
Over the past year, Microsoft has achieved $9.69 in earnings per share (diluted) and currently holds a price-to-earnings ratio of 32.9. Analysts anticipate a 13.94% growth in Microsoft's earnings for the next year, projecting an increase from $10.90 to $12.42 per share. The company is expected to report earnings later this month, on Tuesday, October 24th.
Microsft Needs to Hold Above Critical Support
There are several key takeaways from the above chart. Firstly, it’s significant that the 200-day Simple Moving Average (SMA) and the shorter time-frame SMA, such as the 50-day, are beginning to grow closer. Converging key moving averages might signal that a breakout is likely in the near future. The longer the range in MSFT contracts, the odds increase for tremendous momentum and continuation once the stock breaks out.
Secondly, a wedge formation has formed in MSFT, and a critical level of support has developed and held firm throughout the recent market weakness. Going forward, if MSFT is to continue higher and potentially break out of the forming consolidation, the stock will need to firmly hold above $310 and see its buyers step higher.
