Microsoft (MSFT) stock is extending gains ahead of the titan’s fiscal Q2 earnings scheduled to be released after the market close on Wednesday, July 29. Consensus is for the multinational to post $87.42 billion in revenue on $4.21 in earnings per share (EPS), representing a 15.34% year-over-year increase.
Heading into the quarterly print, Microsoft shares are down more than 15% versus their June high.
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www.barchart.comOptions Pricing Suggests MSFT Stock Will Rally After Earnings
Despite recent underperformance amid a broader tech rout, the derivatives market believes MSFT shares will push higher after earnings tomorrow.
According to Barchart, the put-to-call ratio on options contracts expiring on July 31 sits at 0.45x as of writing, indicating a strong bullish skew.
And the upper price on those contracts is set at $413 currently, signaling Microsoft could gain more than 6% from here through the end of this week.
Note that the Nasdaq-listed firm has a history of closing both July and August in the green, a seasonal pattern that makes it even more attractive to own in the near term.
Technicals and Valuation Warrants Buying Microsoft Shares
What’s also worth mentioning is that the technical setup heading into MSFT’s quarterly earnings also favors upside momentum.
Microsoft shares have recently ripped through its 20-day moving average (MA) and now look poised to break above its 50-day MA as well. A decisive break above $399 could help sustain its upward trajectory in the near term.
At the time of writing, MSFT is trading at a forward price-to-earnings (P/E) multiple of under 20x, a compelling valuation for a major artificial intelligence (AI) beneficiary.
Microsoft also currently pays a small dividend yield of 0.94%, which further boosts its appeal for income-focused investors.
That said, insiders have predominantly sold MSFT in the trailing three months, according to data from Barchart.
How Wall Street Recommends Playing Microsoft
Wall Street remains bullish as ever on Microsoft, heading into its fiscal Q2 earnings on Wednesday.
The consensus rating on MSFT stock sits at “Strong Buy,” with the mean price target of about $545 indicating potential upside of nearly 40% from current levels over the next 12 months.
www.barchart.com On the date of publication, Wajeeh Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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