Dow component Microsoft Corp. (MSFT) reports Q3 2021 earnings after Tuesday’s closing bell, with analysts looking for a profit of $1.77 per-share on $40.83 billion in revenue. If met, earnings-per-share (EPS) will mark a 26% profit increase compared to the same quarter in 2020. The stock ran in place in January despite beating Q2 top and bottom line estimates by wide margins but took off in a strong uptrend earlier this month and is trading at an all-time high.
Keep Eye on Azure Growth
As usual, Microsoft investors will be focusing on quarterly sales in the Intelligent Cloud segment, with healthy growth in prior quarters driven by the Azure public cloud computing system. Azure has reported growth of 47%, 48%, and 50% in the last three quarters and any deceleration could have a negative impact on price action. The Productivity and Business Process Segment will also be watched closely, following 13% growth in Q2 and 11% in Q1.
Console and video game sales could be a wild card after NPD Group reported that consumer spending rose 18% year-over-year to a March record of $5.6 billion. Quarterly spending rose 30% above Q1 2020, even though sales exploded during lockdowns in February and March. Total XBox sales could also move the market because Sony PlayStation and Nintendo Switch have been outselling the US brand, according to industry reports. However, persistent inventory shortages make it hard to gauge Xbox’s true sales momentum.
Wall Street and Technical Outlook
Wall Street coverage has been pristine for years, with a current ‘Buy’ rating based upon 32 ‘Buy’, 2 ‘Overweight’, and 2 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions even though Mister Softee has doubled in price since March 2020. Price targets currently range from a low of $242 to a Street-high $330 while the stock is set to open Monday’s session about $22 below the median $283 target. This low placement isn’t an obstacle, given stellar price action in recent weeks.
Microsoft topped out at 191 in February 2020 and sold off nearly 60 points into March. It returned to resistance in May and broke out in June, entering a strong trend advance that paused with other big tech stocks in September. Bullish price action has carved two sets of higher highs since that time, even though the majority of the big tech universe is still struggling with 2020 resistance. This market leadership is likely to continue through 2021 and beyond.
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Disclosure: the author held no positions in aforementioned securities at the time of publication.