Microsoft Readies For Earnings (MSFT)

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Microsoft Corp. (NASDAQ: MSFT) reports earnings after the close of trading today, and First Call has estimates at $0.44 EPS on $14.5 Billion in revenues.  Ballmer-Gates & Co. is expected to post $0.48 EPS and $15.56 Billion in revenues next quarter, which also marks its June-2008 fiscal year end.  For fiscal June-2009, the estimates are $2.10 EPS on $66.5 Billion in revenues.

Shares closed at $31.45 yesterday and a 1.5% gain to $31.93 has some of the numbers looking skewed.  The reason this stock is not at $35.00 or higher is because of the potential Yahoo! (NASDAQ: YHOO) acquisition share dilution, and the disruption that is currently happening.  Investors are going to be looking at this Yahoo! merger commentary quite closely.

Analysts are still positive and the average target from analysts is almost $39.00.  Its 52-week trading range is $26.87 to $37.50.  Its 50-day simple moving average is $28.68 and its 200-day simple moving average is $30.73.  With a gain of almost 4% yesterday and a 1.5% gain so far today, the expectations are for a strong report.  Options traders appear to be braced for a move of about $1.15 in either direction, which seems small on the surface.  We’d also note that options activity seems somewhat light compared to prior days that the software giant was set to report.

Based upon what we saw out of Q1 PC shipments last week, and based on comments out of IBM, Intel, and other key technology stocks, we expect the earnings to be a very strong report.

Jon C. Ogg
April 24, 2008