Microsoft Earnings Preview, Investors Look To Cloud
CMC Markets | Jul 19, 2017 14:35
Microsoft (NASDAQ:MSFT) will announce its fourth-quarter earnings on Thursday after the close in New York at 21:00 BST.
Microsoft is expected to report adjusted earnings per share (EPS) of $0.70 for the fourth quarter, up only 2.5% year-on-year, while sales are expected to rise 7.2% year-on-year to $24.29 billion. This is well below the 23 times forward earnings the shares have been trading at lately. Last quarter, Microsoft beat expectations on EPS $0.73 to $0.67, so this quarter is looking steady.
But will steady be enough to satisfy the market? Although the valuation still looks stretched relative to growth, the shares have gone on to hit a fresh record high this week. Microsoft is keeping in step with wider tech sector as the Nasdaq 100 also reached a record high this week.
In the latest quarter the revenue stream from ‘more personal computing’ fell by 7% and came in below expectations. Lower phone revenue was to blame for it. Looking to the fourth-quarter, sales for the division are tipped to be below that of the third-quarter.
The cloud business is performing well and it has been an area that investors have been playing close attention to. For the fourth-quarter, Microsoft expects revenue from the cloud division to increase by approximately 8% compared with the third quarter. The Azure product will be good a barometer of success, and keep in mind third-quarter revenue nearly doubled, and investors are wondering can that growth rate be sustained.
The share price has been in solid uptrend and seeing as it registered yet another record-high on Monday the outlook is bullish. $80 is the next big number to look out for to the upside. Should we see pullbacks, the April support at $67.10 could see buyers enter the fold. The next support region below that is $63.72 – which coincides with the 50-day moving average.
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