Microsoft Corporation (MSFT) shares initially moved lower in the aftermath of its third quarter financial results, but they recovered on Friday following new guidance and analyst upgrades. Revenue rose 15.6% to $26.82 billion – beating consensus estimates by $1.05 billion – while earnings per share of 95 cents beat consensus estimates by 10 cents per share. The strongest growth came from server and cloud services, which grew 20%.
On its conference call, the company provided fourth quarter revenue guidance of $28.8 billion to $29.5 billion, which was higher than the $28.08 billion consensus estimate. JPMorgan analysts upgraded the stock from Neutral to Overweight and increased their price target to $110 per share, which represents a significant premium to the current market price. Additional analysts could weigh in on the results next week and provide potential catalysts for traders. (For more, see: Microsoft Jumps After Earnings Beat.)
From a technical standpoint, Microsoft stock rebounded from the 50-day moving average at $93.06 to break out from R1 resistance at $96.65 and prior highs, but it remains within its price channel dating back to December of last year. The relative strength index (RSI) appears neutral with a reading of 56.82, but the moving average convergence divergence (MACD) continues to trend higher past the zero line, suggesting potential for a further rebound ahead.
Traders should watch for a breakout from the upper end of its price channel at around $100.00 to R2 resistance at $102.02 or a breakdown to retest support at the 50-day moving average or pivot point at $91.86. Despite the positive financial results, traders should tread carefully moving into next week given that Friday’s black candlestick shows a close below the highs of the day. That said, the intermediate trend remains bullish. (For additional reading, check out: Microsoft: 7 Secrets You Didn’t Know.)
Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.