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Microsoft (MSFT) Stock Sinks As Market Gains: What You Should Know

Zacks Equity Research
Is (MSFT) Outperforming Other Computer and Technology Stocks This Year?

Microsoft (MSFT) closed the most recent trading day at $126.04, moving -0.11% from the previous trading session. This move lagged the S&P 500's daily gain of 0.16%. Elsewhere, the Dow gained 0.26%, while the tech-heavy Nasdaq added 0.29%.

Coming into today, shares of the software maker had lost 2.3% in the past month. In that same time, the Computer and Technology sector lost 7.21%, while the S&P 500 lost 3.66%.

MSFT will be looking to display strength as it nears its next earnings release. The company is expected to report EPS of $1.21, up 7.08% from the prior-year quarter. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $32.74 billion, up 8.82% from the year-ago period.

MSFT's full-year Zacks Consensus Estimates are calling for earnings of $4.58 per share and revenue of $124.86 billion. These results would represent year-over-year changes of +18.04% and +13.14%, respectively.

It is also important to note the recent changes to analyst estimates for MSFT. These recent revisions tend to reflect the evolving nature of short-term business trends. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.

Our research shows that these estimate changes are directly correlated with near-term stock prices. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

Ranging from #1 (Strong Buy) to #5 (Strong Sell), the Zacks Rank system has a proven, outside-audited track record of outperformance, with #1 stocks returning an average of +25% annually since 1988. Within the past 30 days, our consensus EPS projection has moved 3.68% higher. MSFT is currently sporting a Zacks Rank of #2 (Buy).

Looking at its valuation, MSFT is holding a Forward P/E ratio of 27.56. Its industry sports an average Forward P/E of 30.35, so we one might conclude that MSFT is trading at a discount comparatively.

We can also see that MSFT currently has a PEG ratio of 2.22. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. MSFT's industry had an average PEG ratio of 2.22 as of yesterday's close.

The Computer - Software industry is part of the Computer and Technology sector. This group has a Zacks Industry Rank of 79, putting it in the top 31% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.


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