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Will Azure Undermine Microsoft Quarter?

·2 minuto per la lettura

Dow component Microsoft Corp. (MSFT) reports fiscal Q2 2022 results after Tuesday’s closing bell, with analysts looking for a profit of $2.32 per-share on $51.0 billion in revenue. If met, earnings-per-share (EPS) will mark a 14% profit increase compared to the same quarter last year. The stock rose 4.2% in October after beating Q1 estimates and lifted to an all-time high at 349.67 just ahead of the Thanksgiving holiday. The stock has given up all gains posted since July 2021 in the last two months.

Slowing Azure Growth?

The Azure cloud computing segment continues to book strong growth but there is disagreement about the most recent quarter, with some market watchers worried that tough comparisons and adverse seasonality will negatively impact results. Meanwhile, the More Personal Computing segment continues to weigh on profits, yielding lower estimates in expectations of weakening PC sales. Note: the company’s recent Activision-Blizzard Inc. (ATVI) acquisition won’t impact the reporting quarter.

Citigroup analyst Tyler Radke just reiterated his ‘Buy’ rating while lowering Microsoft’s price target from $407 to $376. His commentary notes “a modestly positive set-up” for the quarterly report, powered by “strong renewals by enterprise customers, with particular strength in Office 365 and Dynamics”. However, he admits that Azure revenue growth could disappoint, moderating “on a tough comparison and seasonally weaker bookings”.

Wall Street and Technical Outlook

Wall Street consensus stands at a ‘Strong Buy’ rating based upon 30 ‘Buy’, 2 ‘Overweight’, 4 ‘Hold’, 0 ‘Underweight’, and 0 ‘Sell’ recommendations. Price targets currently range from a low of $294 to a Street-high $425 while the stock is set to open Tuesday’s session right on top of the low target. Short-term downside appears limited with this humble configuration but lower-than expected Azure growth could generate enough bearish sentiment to power a selloff.

Microsoft has been an outstanding performer since 2016. It mounted the February 2020 peak at 190.70 in June, entering a strong uptrend that cleared secondary resistance at 233 in January 2021. Price action carved a string of higher highs and higher lows into November’s all-time high, ahead of a decline that relinquished more than 20% into Monday’s intraday low. That session could mark a tradable low but market volatility is too high to make a bullish call.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

This article was originally posted on FX Empire


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