Microsoft, Daily
Many top companies are reporting their first quarter financials this week, including Microsoft (MSFT). The earnings reports this week are very crucial as investors are looking for clues or guidance on how the 2020 outlook appears after more than two thirds of the world economy shut down due to the Covid-19 pandemic.
The coronavirus outbreak has caused severe supply chain disruption since early 2020. Microsoft acknowledged in February that its near-term business is likely to miss estimates as its More Personal Computing (which makes up a third of Microsoft’s total revenue) suffered the most due to the virus outbreak. The shipments of the personal computing segment declined 12.3% y/y in the 1st quarter of 2020 (Source: Gartner.com). The company had expected revenues between $10.75 billion and $11.15 billion. However, work-from-home and stay-at-home orders in the wake of the worldwide lockdown lead to an unexpected boost in demand for office equipment? This is expected to generate increased revenues from mobile Surface devices and a slight increase y/y.
The strength of Microsoft’s Intelligent Cloud business will continue to be the catalyst for the stock’s strong return over the year to date. Azure revenues surged 64% at constant currency on a y/y basis in the last reported quarter. Microsoft’s cloud platform business ‘Azure’ has experienced a significant surge in demand as the work-from-home trend continues. Microsoft’s Azure is a recurring subscription business model which will increase company revenue, and Microsoft also reported a huge surge in subscriptions on Teams and Windows Virtual Desktop as its subscribers made calls and meetings as part of Work-from-home and Stay-at-home activities. There are incredibly high expectations that Azure has performed well to reflect continued strength in the consumption and per-user based services.
Microsoft will report its quarterly earnings this Wednesday (April 29) after hours. The tech giant is expected to report adjusted earnings per share of $1.26 (source: Yahoo finance), up from $1.14 in the prior-year quarter, according to third-party consensus analyst estimates. Revenue is projected at $33.64 billion, up 10.50% from a year ago ($30.57 billion in revenue).
Technical Analysis
It has been a roller coaster year for MSFT shares, as its price reached the all-time high at $190.20 on 11th February and then declined ~30% to a 2020 low 6 weeks later at $132.52 (23rd March 2020). The share rebound back to April high $179.80 before moving to $174.17 (at time of writing, April 27). The MSFT share price has risen ~10% for the year 2020.
From the technical perspective, the trend is currently bullish. The widening gap between tankan-sen and kijun-sen and also the kumo shift to up-kumo show a strong bullish momentum. The share price has broken the down-kumo (14th Apr) and remained above since then. The ichikou-span being currently inside the up-kumo, suggests the high probability that the price is in the consolidation- phase. The nearest support is at $171.77 followed by $161.61. The nearest resistance is at $180.66 (span-A peak) and followed by the highest price $190.14. The 14-day RSI indicator is currently above 50 level at 57.47.
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Tunku Ishak Al-Irsyad
Market Analyst
HF Educational Office – Malaysia
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