Microsoft (MSFT) Dips More Than Broader Markets: What You Should Know

Zacks Equity Research

Microsoft (MSFT) closed the most recent trading day at $224.15, moving -0.36% from the previous trading session. This change lagged the S&P 500's daily loss of 0.22%. Meanwhile, the Dow lost 0.23%, and the Nasdaq, a tech-heavy index, lost 0.38%.

Prior to today's trading, shares of the software maker had gained 5.09% over the past month. This has lagged the Computer and Technology sector's gain of 5.2% and outpaced the S&P 500's gain of 2.78% in that time.

Wall Street will be looking for positivity from MSFT as it approaches its next earnings report date. The company is expected to report EPS of $1.64, up 8.61% from the prior-year quarter. Our most recent consensus estimate is calling for quarterly revenue of $40.12 billion, up 8.72% from the year-ago period.

For the full year, our Zacks Consensus Estimates are projecting earnings of $6.73 per share and revenue of $157.35 billion, which would represent changes of +16.84% and +10.02%, respectively, from the prior year.

Investors should also note any recent changes to analyst estimates for MSFT. These revisions typically reflect the latest short-term business trends, which can change frequently. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

Our research shows that these estimate changes are directly correlated with near-term stock prices. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Within the past 30 days, our consensus EPS projection has moved 0.17% lower. MSFT is currently a Zacks Rank #3 (Hold).

Digging into valuation, MSFT currently has a Forward P/E ratio of 33.44. This valuation marks a no noticeable deviation compared to its industry's average Forward P/E of 33.44.

Also, we should mention that MSFT has a PEG ratio of 2.53. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. Computer - Software stocks are, on average, holding a PEG ratio of 2.85 based on yesterday's closing prices.

The Computer - Software industry is part of the Computer and Technology sector. This industry currently has a Zacks Industry Rank of 189, which puts it in the bottom 26% of all 250+ industries.

The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Be sure to follow all of these stock-moving metrics, and many more, on Zacks.com.


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