Microsoft (MSFT) at All-Time High After Blowout Quarter

Dow component Microsoft Corporation (MSFT) is trading at an all-time high near $238 in Wednesday’s premarket, after beating fiscal second-quarter 2021 top- and bottom-line estimates by wide margins and raising third-quarter guidance. Mr. Softee posted a profit of $2.03 per share during the quarter, beating expectations by $0.62, while revenue grew 16.7% year over year to $43.08 billion, better than the $40.23-billion consensus. Third-quarter revenue is now expected to exceed prior estimates by more than $2 billion. 

Azure cloud computing services rose an impressive 50% year over year, on par with 48% growth in the first quarter and 47% in the fourth quarter of 2020. Xbox income surged 40%, which isn’t surprising, given the new generation console release during the quarter. Traditional products reported decent metrics as well, with Office and LinkedIn products adding modestly to revenue while Windows OEM brought up the rear, posting just 1% growth.

The overnight rally lifted Microsoft stock above September resistance at $233 to an-all time high at $240.80. However, it is pulling back ahead of the opening bell, trading just four points above the breakout level, so bulls need to wait for price action in the regular session before declaring victory. Accumulation readings lifted to new highs prior to the earnings release, offering potential buyers a stiff tailwind in this strong January market.

Wall Street consensus on Microsoft is nearly pristine, with a “Buy” rating based upon 29 “Buy,” two “Overweight,” and three “Hold” recommendations. No analysts are recommending that shareholders reduce position size or move to the sidelines at this time. Price targets currently range from a low of $220 to a Street-high $285, while the stock is set to open Wednesday’s session about $12 below the median $250 target. A sustained upside is possible with this modest placement.

Microsoft Weekly Chart (2013–2021)

The stock broke out above the 2007 high at $37.50 in 2013 and entered an uptrend that completed a round trip into the 1999 high near $60 in 2016. The subsequent breakout eased quickly into a rising channel pattern and held within those boundaries into a 2017 channel breakout. The rally topped out above $115 in the fourth quarter of 2018, giving way to an intermediate correction that posted an eight-month low at year-end.

A strong recovery wave reached the prior high in March 2019, yielding an immediate breakout that stalled at $190.70 in February 2020. The stock fell 30% into March and recovered at the same trajectory, breaking out once again in June. This buying impulse stalled at $232.86 in September and eased into a symmetrical triangle pattern, mounting resistance (upper black line) ahead of this morning’s confessional.

Breakouts over the September high and triangle resistance have established support levels at $233 and $225. A pullback to the lower level would offer a more rewarding entry, ahead of positive price action that could easily reach $300 in 2021. Conversely, a breakdown through $225 would signal a failure swing, raising the odds for an intermediate top and multi-month correction into the 200-day exponential moving average (EMA), now rising through $202.

The Bottom Line

Microsoft blew away quarterly earnings estimates and is trading at an all-time high on Wednesday morning.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.