Microsoft Stock Up 52% in 2021 – Time to Buy MSFT Stock?

Microsoft stock went up as much as 52% last year and managed to outperform its broad-market large-cap benchmarks by a long shot as the company founded by Bill Gates continues to reap the benefits of being a leading cloud service provider.

According to data from Seeking Alpha, Microsoft managed to beat the market’s estimates for both its earnings and revenues during the first three quarters of the 2021 calendar year.

For its adjusted earnings per share, Microsoft exceeded the consensus by an average of 10.5%. Meanwhile, when it comes to revenues, the tech company exceeded the market’s forecasts by an average of 3.1% in the first three quarters of last year as well.

Back in August this year, the company made an important announcement regarding the pricing of its flagship Microsoft Office 365. According to a blog post, the new prices will take effect starting on 1 March 2022 with the Business Basic version moving from $5 to $6 per user while premium versions will experience a $2 to $3 increase per user as well.

Overall, it was a great year for the Redmond-based software developer and cloud services provider.

What can be expected from Microsoft stock for 2022 considering the macroeconomic environment and the many catalysts that seem to be playing in favor of the business’s performance?

In this article, I’ll be assessing the price action and fundamentals of this tech stock to outline plausible scenarios for the future.

67% of all retail investor accounts lose money when trading CFDs with this provider.

Microsoft Stock – Technical Analysis

The price of Microsoft stock has been on an uptrend since the pandemic crash of February-March 2020 as tech companies, and especially businesses within the cloud services industry, emerged as winners during the health crisis.

Even though the price action was a bit volatile during that period, it has remained confined within the boundaries of the price channel highlighted in the chart above most of the time.

Since the company reported its earnings report covering the first quarter of its 2022 fiscal year, the price went on to break above this formation but bears took over shortly afterward to plug MSFT stock back into the channel.

Right now, a series of lower highs are favoring a short-term bearish outlook for MSFT and this could lead to another tag of the lower bound of the channel shortly – possibly aiming for the $320 level for a 5% downside risk.

Despite this weakness, the mid-term outlook remains bullish as long as the price stays above the 200-day simple moving average.

Microsoft Stock – Fundamental Analysis

Microsoft’s financial performance has been quite positive in the past few years with total revenues growing at an average rate of 15% per year since 2017 while operating margins have been progressively improving as well.

As a result, the company’s GAAP earnings per share have more than doubled from $3.25 in 2017 to $8.05 last year at a compounded annual growth rate of 25.5%.

Meanwhile, Microsoft’s balance sheet is one of the most robust on the planet with a total of $130.6 billion in cash and equivalents and a long-term debt of $50 billion on total assets of $335.42 billion.

Last year alone, the company generated free cash flows of $56 billion and that gives the business the possibility of further expanding its reach to up-and-coming industries by acquiring well-established firms. It also gives the management significant headroom to buy back huge amounts of stock or expand the firm’s dividend.

At its current price of $334.75 per share, Microsoft is trading at 36 times its forecasted earnings for 2022. This multiple is not necessarily elevated considering the pace at which the firm’s earnings are growing and its positive financial situation.

All things considered, the outlook for Microsoft from a fundamental perspective is bullish. Therefore, any significant declines in the price of its stock this year should be considered a buying opportunity.

Buy MSFT Stock at eToro with 0% Commission Now!