Earnings preview: What to expect from Microsoft today

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Microsoft
MSFT
Inc. is expected to report earnings after today’s close. The stock reached an all-time high of $349.67/share in 2021 and is currently trading near $242/share. The stock is prone to big moves after reporting earnings and can easily gap when numbers are strong. Conversely, if the numbers are disappointing, the stock can easily go down. To help you prepare, here’s what the street expects:

Gallery: Microsoft’s greatest hits and flops

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Income example:

The company is expected to report earnings of $2.27 per share on revenue of $53.48 billion. Meanwhile, the so-called Whisper number is up $2.25/share. The Whisper Number is the Street’s unofficial take on earnings.

A closer look at the fundamentals:

It is encouraging to see that the company has managed to grow its revenues steadily in each of the past four quarters on a year-over-year basis. It’s also encouraging to see sales grow in each of the past four quarters. Separately, return on equity has been very high, almost 50% in each of the past four quarters, which is a very encouraging sign. The company has also made a major investment in OpenAI, ChatGPT’s parent company, and that could be a major game changer in the future.

A closer look at the technique:

Technically, the stock has been under a lot of pressure over the past year and is down more than 20% from its bear market peak in 2021. The stock is trying to bottom, but is still trading below the line of the moving average over 200 days. The bulls want to see the stock rise after reporting earnings and the bears want to see the gap fall.

Pay attention to how the stock reacts to the news:

From where I sit, the most important property I look at during earnings season is how the market and a specific company react to the news. Remember, always keep your losses small and never argue with the tape.

Disclosure, the stock was previously listed in my FindLeadingStocks.com newsletter.

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