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Microsoft Hits All-Time High: Can the Rally Last?

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The tech behemoth Microsoft MSFT, lately synonymous with game-changing innovations in the AI field due to its association with OpenAI’s ChatGpt, has again dominated headlines. On Tuesday, its stock price rallied to an all-time high of $366.78. On the day, share price increased about 4%, closing at $359.49. This jump marks a 50% ascent for the year.

What’s Behind the Latest Rally?

Microsoft’s recent announcement detailing the pricing structure for its Microsoft 365 AI subscription offering, Copilot, led to the rally, as quoted on CNBC. Copilot seamlessly integrates artificial intelligence into the beloved Office suite, such as Word, Excel and Teams.

At an additional $30 per month, this offering has the potential to boost monthly prices for enterprise customers by an astounding 83%. This will result in a considerable boost in recurring subscription-based revenues.

What Makes Copilot Famous?

First announced in March, Copilot is not merely an ornamental feature. It is designed to raise the functionality of routine tasks, from suggesting fetching writing prompts to summarizing extensive meetings and prioritizing emails.

Copilot is a complete AI solution that can cater to modern-day business needs to foster productivity. While 600 bigwigs, including the likes of Goodyear and General Motors, have already experienced Copilot, the date of its public appearance is unknown.

What’s in Store for MicrosoftThis Earnings Season?

Microsoft is set to release its earnings on Jul 25, 2023, after market close. Currently, MSFT has a Zacks Rank #3 (Hold) and an Earnings ESP of -1.72%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1, 2 (Buy) or 3 increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Microsoft has seen downward earnings estimate revisions over the past 7, 30 and 60 days for the to-be-released quarter. One of 13 analysts has cut estimates over the past seven days, whereas two and three analysts have slashed estimates over the past 30 and 60 days. Its current-quarter earnings estimates are pegged at $2.55, down by a penny over the past month.

The company beat earnings estimates in the first three of the trailing four quarters, with an average four-quarter surprise of 3.25%. Microsoft is expected to post earnings and revenue growth of 14.35% and 6.74%, respectively, for the to-be-reported quarter.

What Do Analysts Say?

Microsoft currently has an average brokerage recommendation (ABR) of 1.31 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell etc.) made by 32 brokerage firms. The current ABR compares to an ABR of 1.38 a month ago based on 32 recommendations.

Of the 32 recommendations deriving the current ABR, 27 are Strong Buy and two are Buy. Strong Buy and Buy, respectively, account for 84.38% and 6.25% of all recommendations. A month ago, Strong Buy made up 81.25%, while Buy represented 6.25%.

Based on short-term price targets offered by 30 analysts, the average price target for Microsoft comes to $347.72. The forecasts range from a low of $232.00 to a high of $415.00 (You can see Microsoft’s Price Target & Stock Forecast here).

What Does Technical Analysis Say?

From a technical standpoint, Microsoft was at 359.49 as of Jul 18, 2023, comfortably above its 10-day, 50-day and 200-day simple moving averages of 338.98, 328.31 and 271.48, respectively, (per TipRanks). The rise of the 50-day moving average above the 200-day moving average is known as a golden cross, which implies bullish sentiment.
Microsoft Corporation (MSFT): Free Stock Analysis Report

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