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Software giant Microsoft (MSFT) has earned plaudits for its successful pivot from desktop computing to cloud computing. And MSFT stock has risen as a result. But after a recent pullback, many investors may be wondering: Is Microsoft stock a buy right now?
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Bill Gates and Paul Allen started Microsoft in 1975 at the dawn of the personal computer era to make PC operating system software. The company’s Windows operating system came to dominate the PC landscape. Microsoft expanded over the years into productivity software, server software, internet services, video games, and PC hardware and accessories.
Current Chief Executive Satya Nadella took the reins of the Redmond, Wash.-based company in 2014 and led Microsoft full steam into cloud computing.
The company’s cloud offerings today include Azure infrastructure services, Office 365 productivity software and Dynamics enterprise software. Also, Microsoft owns LinkedIn, Skype and GitHub.
Microsoft Trails Amazon In Cloud Computing
Microsoft is gaining on Amazon.com‘s (AMZN) Amazon Web Services in the market for cloud infrastructure services.
In the first quarter, Amazon Web Services had 33% market share, according to research firm Canalys. Microsoft was in second place with 21% market share.
Other major cloud players include Alphabet (GOOGL) unit Google Cloud Platform, as well as China’s Alibaba (BABA) and Tencent (TCEHY). Overall enterprise spending on cloud infrastructure services reached $55.9 billion in the first quarter, up 34% year over year, Canalys said.
MSFT Stock News: Metaverse Advances
Microsoft lately has been promoting the metaverse, an immersive, next-generation version of the internet. It currently makes HoloLens mixed-reality headsets for remote collaboration.
At Microsoft’s Ignite 2021 online event on Nov. 2, Microsoft showed off its latest innovations for the corporate metaverse. They include Dynamics 365 Connected Spaces and Mesh for Microsoft Teams. Microsoft stock rose 1.1% after the announcements.
At CES 2022, chipmaker Qualcomm (QCOM) announced a partnership with Microsoft to develop lightweight augmented-reality glasses.
On Jan. 18, Microsoft announced a deal to buy video game publisher Activision Blizzard (ATVI) for $68.7 billion in cash. Microsoft said the Activision purchase will accelerate the growth of its gaming business and provide building blocks for the metaverse. But Microsoft stock fell 2.4% on the news.
Windows 11 Release, Nuance Acquisition
On Oct. 5, Microsoft released its Windows 11 personal computer operating system. Windows 11 features a refreshed design with a new user interface and Start menu. It also provides PC performance improvements and integrates the Teams videoconferencing app. Windows 11 is the successor to Windows 10, which came out in July 2015.
On March 4, Microsoft completed its $19.7 billion acquisition of Nuance Communications, a leader in voice recognition software and conversational artificial intelligence. The acquisition of Nuance, announced in April 2021, will give Microsoft more heft in the health-care sector.
Microsoft Stock Fundamental Analysis
Late on April 26, Microsoft delivered better-than-expected results for its fiscal third quarter ended March 31. Microsoft stock jumped 4.8% on the news the next day.
Microsoft earned $2.22 a share on sales of $49.4 billion in the March quarter. Wall Street had expected Microsoft earnings of $2.19 a share on sales of $49 billion, according to FactSet. On a year-over-year basis, Microsoft earnings rose 14% while sales climbed 18%.
On June 2, Microsoft lowered its revenue and earnings forecasts for the current quarter, blaming foreign exchange headwinds. Microsoft stock wavered on the news but ended the day up 0.8%.
Based on the midpoint of its revised guidance, Microsoft now expects to earn $2.28 a share on sales of $52.34 billion in its fiscal fourth quarter. That would translate to year-over-year growth of 5% in earnings and 13% in revenue.
The next catalyst for Microsoft stock could be the company’s June-quarter earnings report, due in late July.
MSFT Stock Technical Analysis
On Oct. 18, Microsoft stock hit a buy point of 305.94 out of a flat base, according to IBD MarketSmith charts. MSFT stock notched a record high of 349.67 on Nov. 22. But it tumbled during the stock market correction. It ended the regular session June 7 at 272.50.
MSFT stock flashed a clear sell signal on Jan. 5 when it closed well below its 50-day moving average line, a key support level.
Microsoft stock has a middling IBD Relative Strength Rating of 63 out of 99. The best growth stocks typically have RS Ratings of at least 80. The Relative Strength rating shows how a stock’s price performance stacks up against all other stocks over the last 52 weeks.
The IBD Stock Checkup tool gives MSFT stock an IBD Composite Rating of 76 out of 99. IBD’s Composite Rating combines five separate proprietary rankings into one easy-to-use number. The best growth stocks have a Composite Rating of 90 or better.
Microsoft ranks first out of four stocks in IBD’s Computer Software-Desktop industry group. But the desktop software group ranks No. 188 out of 197 industry groups that IBD tracks. Choosing highly rated stocks from leading industry groups in a confirmed stock market uptrend generally increases your chances of making profits in growth stocks.
Microsoft stock is in the IBD Long-Term Leaders Portfolio.
Plus, Microsoft ranked first on IBD’s list of ESG stocks for investors investors focused on environmental, social and governance issues.
Is Microsoft Stock A Buy Right Now?
Microsoft stock is not a buy right now. It needs to form a new base in the right market conditions before setting a potential buy point. Check out IBD’s Big Picture column for the current market direction.
In a negative sign, MSFT stock is trading below its 50-day moving average line. It also is beneath its 200-day line.
Also, Microsoft stock has a worst-possible IBD Accumulation/Distribution Rating of E. The rating, on an A+ to E scale, measures institutional buying and selling in a stock over the past 13 weeks. A+ signifies heavy institutional buying and E means heavy selling. A C rating is average.
Keep an eye on the overall stock market. If the market turns south, don’t try to fight the general stock market direction.
To find the best stocks to buy or watch, check out IBD Stock Lists. Also consult IBD’s Leaderboard, MarketSmith and SwingTrader platforms.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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