Is Microsoft a buy at the highs?

Its time to breakdown one of the most well-known names within the market today. Here is the breakdown of $MSFT better known as Microsoft.


Current Price: $228.00

52/Wk High: $231.15

52/Wk Low: $132.52


Read below for the breakdown.


Microsoft is one of the most well-known companies in the world with a hand-dipped in almost anything related to technology.


$MSFT is a technology company that develops software products, services, and devices like the Xbox and Surface line ups.


According to TREFIS (@trefis) Microsofts stock price can be broken down according to its major lines of business.


Currently, productivity and business process makes up 36.8% of the stock price with the intelligent cloud just behind it, representing 35.5% of the stock price.


Furthermore, 23.1% of the stock price is representative of personal computing and 4.6% is based on the companies cash position.


While $MSFT is a monster company with typically astonishing growth the popularity of the name has risen in recent weeks due to its major interest in acquiring social media platform Tik Tok in a joint deal with $WMT.


According to multiple sources, the deal winner of the Tik Tok deal should be announced any day but that does not guarantee Microsoft the deal as there are other competitors such as $ORCL bidding.


When last reported the expected purchase price of a part of Tik Tok is expected to fall between $20 billion to $30 billion and in the case of Microsoft winning the deal, it could mean big upside for the stock.


On the otherhand, if $MSFT does not win the deal there could be a large potential downside, given that the stock has run quite a bit on the Tik Tok rumors already.


Moving into the last earnings report $MSFT continued its staggering growth even in the midst of a pandemic.


$MSFT reported a solid Q4 2020 beat with a reported EPS of $1.46 versus the expected EPS consensus of $1.34. Not only that but revenue came in higher as well at a whopping $38.0 billion.


Digging further into the financials $MSFT last reported total liabilities of $183.007 billion and a total cash on hand position of $136.52 billion as of June 30th.


When it comes to the Q1 2021 forecast the expectations are very positive. $MSFT management expects sales of $35.6 billion.


When it comes to the analysts the results are mostly neutral. Currently, the average price target for $MSFT is $229.52/share representing a minimal .99% upside.


Furthermore, the high price target is $260.00/share representing a 14.41% upside and the low is $195.00/share representing a -14.20% loss.


While analysts are neutral the big money continues to be very bullish with 70.76% of $MSFT being owned by institutions. Top holders include BlackRock Institutional Trust, Capital International Investors, and Capital Research Global Investors.


The stock currently trades at a price to earnings ratio of 39.13x and is currently sitting at an astonishing $1.7 trillion market cap.


When digging into the technicals the 6-month charts do not look attractive if trading on a midterm thesis.


Currently, the 6-month RSI sits at 66.96 which in the grand scheme of things is not super attractive. On the other hand, RSI isn’t everything.


The 6-month MACD currently sits at 3.66 and 5.16 with strong upward momentum in which shows no signs of letting up. Finally, the 6-month CCI sits at a high 143.63.


Lastly, $MSFT does not trade far off its highs. The 52/Wk high is $231.15/share and given its current price of $228.00/share its only trading $3.15 off its highs.


In short, if Microsoft lands the Tik Tok deal and the market continues its strong rally within the technology sector I believe there can be higher highs for $MSFT.


On the otherhand, if Microsoft does not land the Tik Tok deal it could spell short term disaster for the stock given its already massive run up on the rumors.


Finally, Microsoft per usual is still an excellent long term investment but mid and short term I urge caution, and if you do make the bet on the stock short term I recommend a close stop.


EAT - SLEEP - PROFIT


Disclaimer: This is not direct financial advice, simply opinion based on independent research. Luke Donay currently holds long term Jan 21 calls on $MSFT.