Microsoft stock surges 2.5% after the Office price hike: should you invest in MSFT shares now?

On Friday, Microsoft Corporation (NASDAQ:MSFT) shares edged higher 2.5% after announcing plans to raise Microsoft 365 subscription rates for the first time. The company is raising the monthly subscription price for Microsoft 365 Business Basic from $5.00 to $6.00 while the premium version will now cost users $22 per month, up from $20. The company also raised prices across all Microsoft Office 365 E series. 

Microsoft said new prices will take effect from 1st March 2022 globally.

Several analysts raised their MSFT price targets after the announcement, citing the price hike as a major catalyst for growth.

Is Microsoft stock a buy in Q3 2021?

From a valuation perspective, Microsoft shares seem reasonably valued at the current trailing 12-month P/E ratio of 37.79. Furthermore, the company’s forward P/E ratio of 29.66, indicates room for more upward movement amid solid earnings growth.

Analysts expect Microsoft EPS to grow by 39.70% this year and at an average annual rate of 15.25% over the next five years, making the stock attractive to growth investors. Therefore, although Microsoft shares are up nearly 40% this year, there is room for more gains.

Technical overview: Microsoft stock price predictions for Q3 2021

Technically, Microsoft shares seem to have recently broken out of an ascending channel formation in the intraday chart. As a result, the stock is now trading in overbought conditions of the 14-day RSI. Therefore, a short-term pullback could be on the horizon.

However, following the company’s Office 365 price hike, the stock has a solid catalyst to push the price higher. As such, investors can target extended gains at approximately $314.94 or higher at $327.10. On the other hand, those targeting potential pullbacks can target profits at the support levels at $293.95 and $282.09.

Bottom line: the case for buying Microsoft shares now

In summary, although Microsoft shares are up nearly 40% this year, its prospective earnings growth presents an attractive proposition to buy. 

Furthermore, the panned Office 365 price hike boosts long-term revenue and earnings potential, making the stock attractive to growth investors. As a result, it may not be too late to buy MSFT shares.