Microsoft stock prediction after guiding FQ2 revenue above estimates

By:
on Oct 27, 2021
  • Microsoft shares are trading higher on Wednesday morning after announcing its most recent quarterly results.
  • The company reported its fiscal Q1 revenue and earnings Tuesday after markets closed, beating estimates.
  • It also issued FQ2 revenue guidance above the consensus for Street forecasts.

On Wednesday, Microsoft Corporation (NASDAQ:MSFT) shares advanced after announcing its most recent quarterly results. The company reported its fiscal first-quarter 2022 revenue and earnings Tuesday after markets closed, beating the consensus for analyst expectations.

The software infrastructure company also issued better-than-expected FQ2 revenue guidance.

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Microsoft posted fiscal Q1 non-GAAP earnings per share of $2.27, beating the average for analyst estimates of $2.08. In addition, its GAAP EPS of $2.71 was $0.64 ahead of expectations, while revenue for the quarter grew by 21.8% from the same quarter a year ago to $45.3 billion, exceeding expectations by $1.3 billion.

The Redmond, WA-based technology giant now expects FQ2 revenue in the region of $50.15 billion to $51.05 billion, surpassing the Street forecast of $48.92 billion.

Time to bet on MSFT’s outlook?

From an investment perspective, Microsoft shares trade at reasonable trailing 12-month and forward P/E ratios of 38.50 and 30.62, respectively. 

In addition, analysts expect its earnings per share to grow by 39.70% this year, before rising at an average annual rate of about 15.50% over the next five years.

Therefore, although the valuation multiples may not be appealing to short-term investors, the stock could gain the attention of growth investors.

Source – TradingView

Technically, Microsoft shares seem to be trading within an ascending channel formation in the hourly chart. However, the stock has recently pulled back to retest the trendline support, creating a perfect opportunity for a rebound.

Therefore, with shares yet to reach overbought conditions, investors could target profits at about $315.40, or higher at $320.07, while $305.13 and $300.21 are crucial support zones.

It could be time to buy MSFT shares

In summary, Microsoft shares have rallied more than 42% this year, the stock has recently pulled back, creating room for a rebound. 

In addition, given the company’s exciting earnings growth prospects and Street-beating FQ1 results, its FQ2 revenue guidance could be a catalyst for a significant rally.

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