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Microsoft’s stock is on track for its worst year in nearly a decade. It’s currently trading at $244.86, which is around 30% below its peak in 2021. So far this year, shares have fallen by more than 25%, mirroring the performance of the Invesco QQQ. Given this, is it a good time to buy Microsoft shares?
The stock has dropped over 20% this year as the company grapples with growth concerns after a period of record-breaking success. The latest results show first-quarter revenue up by 11% to $50.1 billion, with earnings per share rising to $2.35.
Despite challenges like a strong US dollar and sluggish PC growth, Microsoft’s business has performed well. The strong dollar impacted revenue by about 5%, but its cloud business grew by 31%, which is impressive given the current inflationary pressures.
Revenue for Microsoft’s Productivity and Business Processes segment increased to $16.5 billion. The Intelligent Cloud segment saw a 20% rise in revenue, reaching $20.3 billion. However, the More Personal Computing segment’s revenue fell to $13.3 billion due to a slow PC market, and gaming revenue grew only by 4%.
Microsoft remains a solid investment for several reasons. The company has a strong foothold in key industries like cloud computing, which is crucial for today’s digital world. It has also maintained a healthy relationship with Amazon in this space.
Additionally, Microsoft offers a robust dividend. In the latest quarter, it paid $9.7 billion in dividends and share buybacks. The company has a substantial cash reserve of over $107 billion and a manageable long-term debt of $45 billion.
Furthermore, Microsoft could benefit from a weakening US dollar. The dollar index has recently declined by about 10%. Finally, Microsoft is a leading player in customer relations management (CRM) and gaming.
The daily chart shows a recent bullish trend for Microsoft’s stock. After hitting a low of $213 on November 4, the stock has rebounded and is now above its 25-day and 50-day moving averages. If this trend continues, the stock may rise towards the key resistance level of $294, which is about 20% above the current price. However, if the stock drops below $220, the bullish outlook would be invalidated.