The Microsoft stock price is on track for its worst year in almost a decade. It was trading at $244.86, which is about 30% below the highest level in 2021. The shares have crashed by more than 25% this year, in line with the performance of Invesco QQQ. So, is it safe to buy Microsoft shares?
Microsoft faces challenges
Microsoft stock price has dropped by more than 20% this year. This decline happened as the company faces significant growth concerns after experiencing record growth over the years. The most recent results showed that the company’s first-quarter revenue rose by 11% to $50.1 billion. Its earnings per share rose to $2.35.
Microsoft’s business did well despite facing significant headwinds like a strong US dollar and slow PC growth. The strong USD impacted its revenue by about 5% Its cloud business recorded growth of 31%, which is remarkable since companies are dealing with elevated inflation risks.
The results showed that Productivity and Business Processes revenue increased to $16.5 billion. Its Intelligent Cloud segment saw its revenue surge by 20% to $20.3 billion while More Personal Computing’s revenue retrated to $13.3 billion because of the slow PC market. Gaming’s revenue grew by just 4%.
Why Microsoft is a good investment
Microsoft is a good blue-chip company to invest in for several reasons. First, the company has a strong market share in key industries that are expected to keep growing into the future. For example, it has a strong presence in cloud computing, which is pivotal in how the world operates today. Over the years, it has established a healthy competitive relationship with Amazon.
Second, Microsoft has a strong and healthy dividend. In the most recent quarter, the company paid $9.7 billion in dividends and share repurchases. It has a health dividend that is supported by a large interest-earning cash hoard od over $107 billion. Its total long-term debt is just $45 billion, meaning that the company can cover it well with its cash.
Third, Microsoft will likely benefit as the US dollar strength fades. The US dollar index has pulled back by about 10% in the past few months. Finally, the company is a dominant player in industries like customer relations management (CRM) and gaming.
Microsoft stock price forecast
The daily chart shows that the MSFT share price has been in a bullish trend in the past few days. This rebound is notable since it started when the stock dropped to a low of $213, which was the lowest level on November 4. Microsoft has now retested the upper side of the descending channel and moved slightly above the 25-day and 50-day moving averages.
Therefore, the stock will likely continue rising as buyers target the key resistance level at $294, the highest point on August 16. This price is about 20% above the current level. A drop below $220 will invalidate the bullish view.