From July 14th – July 19th, the S&P 500 encountered a major bout of selling and dropped by 3.2%. Since then, it’s put together an impressive bounce and has recovered more than half its losses. Despite concerns about slowing global growth and the Delta variant, the stock market is being supported by the decline in longer-term rates and expectations of another strong earnings season.
Both of these developments are positive for technology stocks. In addition, the pullback in tech stocks since November have given them more attractive valuations for investors looking for cheaper entry points.
MSFT is one of the largest technology companies in the world with over a $2 trillion market capitalization. The company’s segments include Productivity and Business Processes; Intelligent Cloud; and More Personal Computing. It is also known for its cloud computing arm, Microsoft Azure.
MSFT is scheduled to release its fiscal Q4 earnings next week, and analysts are expecting another strong quarter of growth. Last quarter, it had 19% revenue growth and a 38% increase in net income. Based on early readings from other tech companies, corporate tech expenditures continue to trend higher.
In Q4, analysts expect MSFT’s EPS to increase 34.9% year-over-year to $7.77 in its fiscal year 2021. It surpassed consensus EPS estimates in each of the trailing four quarters.
Despite this strong earnings momentum and its stock price appreciation, MSFT’s valuation has improved with its P/E ratio declining from 50 to 38 over the last six months. Investors should take advantage of this opportunity as the stock is showing considerable momentum by breaking out to new highs this week.
It’s no surprise that MSFT has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting. B-rated stocks have posted an average annual return of 19%, outpacing the S&P 500’s average 7% gain. To see more of MSFT’s POWR Ratings, click here.
Worth nearly $200 billion, AVGO develops and supplies a range of semiconductor and infrastructure software solutions. The company serves critical markets, including data center, networking, enterprise software, broadband, wireless, storage, and industrial.
Since mid-February, the stock has been…
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