Microsoft Q1 results: analyst tip strong EPS as outlook remains positive

When does Microsoft (MSFT) report earnings?

Microsoft will deliver results for its Q1 after market on October 26, 2021.

Microsoft earnings – what to expect

According to data published by NASDAQ and sourced from Zack’s Investment Research, Microsoft Corp (All Sessions) is looking at another solid quarter for earnings growth, with estimated EPS for Q1 to come in at $2.06 per share. The result will be slightly below last quarter’s actual EPS of $2.17. However, with the company beating on earnings in the past four quarters by an average of 16.9%, a beat in line with history could see EPS closer to $2.40 per share. Annualised EPS growth, if the $2.06 estimate is met, will come in at 13.2%

The strong growth from Microsoft is tipped to come from strong revenue growth in the Teams and Azure products, as the Covid-19 shock continues to drive digital transformation across businesses and feed the company’s top line. While still experiencing strong revenues from its traditional software business, the ubiquity of Microsoft products is expected to drive continued growth in its cloud computing and digital offerings, as the business aims to sustain strong growth rates well into the future.

Microsoft earnings – valuation, broker views and sentiment

Microsoft’s current price/earnings sits at a historically rich 38 currently. However, despite this, strong earnings growth moving forward has analysts estimating this multiple to fall in coming years, with the consensus rating for the stock remaining a “buy” amongst 40 surveyed analysts by Refinitiv. IG clients also remain very bullish on the stock, with 94% currently long, versus 6% short.

Microsoft stock – technical analysis

Microsoft shares remain firmly in an uptrend, with the price pushing to fresh record highs last week. Based on the weekly RSI, there is a modest bearish divergence forming between the indicator and price. However, with the stock pushing through resistance at its previous all-time high just above $US300 per share and the weekly RSI retesting overbought levels, momentum and trend can still be said to be firmly skewed to the upside. A strong showing from Microsoft in its earnings this week may be the catalyst to push its stock price higher from here, with the upper bound of its post-pandemic trend channel currently around US $320 per share. Key price support sits at the lower bound of that trend channel, which overlaps close to price support at the stock’s last higher-low at US $280.00 per share.