Shares in tech giant Microsft (MSFT) lost 2.6% in value in after-hours trading, despite reporting better-than-expected earnings.
Earnings: $1.95 per share vs. expectation of $1.78
Revenue $41.71 Billion vs expectation of $41.03
There was no doubt that the star-performer is Microsoft’s ‘Azure’ cloud computing platform, which has continued to show remarkable growth. The platform reported a 50% revenue increase for the quarter. Coming off the heels of a similar rise in Q3 and Q4 2020.
Satya Nadella, Chief executive office of Microsoft predicts a bright future ahead for the tech behemoth:
“Over a year into the pandemic, digital adoption curves aren’t slowing down. They’re accelerating, and it’s just the beginning,”
“We are building the cloud for the next decade, expanding our addressable market and innovating across every layer of the tech stack to help our customers be resilient and transform.”
Looking at the numbers, we see no obvious catalyst for the sell-off. One reason is the market may have been expecting a stronger set of results than was delivered.
The price had appreciated in four out of the last five sessions, having posted four straight days of gains and four new all-time-highs. So maybe investors had become a little too optimistic in the short-term.
Microsoft stock remains in a clearly bullish trend and will likely see investors adding on any pull-back.
The growth rates suggest that the stock can continue to do well, as business and consumer spending accelerates in the space. We see particular value in cloud computing and believe this division of the company will be a key driver of revenue for some time.
Support can be found at the February highs of $246 per share and again at the lower end of the ascending channel at $236. I would advocate buying on any weakness (which I believe would be short-lived) as the stock price should continue to make new highs.
Alternatively, a close above the top line of the ascending channel may offer an entry point for longs. With a view to closing the position should the price close back within the channel.
The long-term Bullish outlook would be negated on a close below the 50-Day Moving average at $218.
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