Michael Fowlkes' Analyst Insights
Options and ETF Analyst Writer
October 17, 2016 - Microsoft to Report Fiscal Q1 Numbers October 20
Tech titan Microsoft (MSFT) will report its fiscal first quarter numbers on October 20. The company will report its quarterly results after the market close, with the consensus calling for earnings of $0.68 per share. During the same period last year the company earned $0.57 per share, and the stock is up a modest 3.9% on the year.
MSFT was recently trading at $57.65, down $1.05 from its 12-month high and $11.12 above its 12-month low. Technical indicators for MSFT are bullish and the stock is in a weak upward trend. The stock has recent support above $56.30 and recent resistance below $58.40. Of the 24 analysts who cover the stock, 15 rate it a "strong buy", two rate it a "buy”, six rate it a "hold", and one rates it a "sell". The stock receives S&P Capital IQ's 3 STARS "Hold" ranking.
Microsoft got a big boost following its last quarterly report, and if the company is able to post another set of strong numbers there is still more upside for the stock. The stock trades with a trailing P/E of 27.3, but a much lower forward P/E of 17.8. As long as the company is able to hit its earnings estimates the stock should build on its recent gains, and with analysts forecasting earnings growth of 3.6% this year, and a much higher 11.4% next year, there is still upside for the tech leader. The consensus calls for earnings of $0.68, but the street expects a much better quarter, with the whisper calling for $0.72. If Microsoft is able to hit the whisper number, shareholders will likely enjoy a nice jump in shares.
Stock Only Trade
If you're looking to establish a long stock position in MSFT, consider buying the stock under $57.75. Sell if it falls below $52.00 or take profits if it gets to $66.50.
If you want to set up a bullish hedged trade on MSFT, consider a December 45/50 bull-put credit spread for a 25-cent credit. That's a potential 5.3% return (30.5% annualized*) and the stock would have to fall 12.8% to cause a problem.
If you want to take a bearish stance on MSFT at this time, consider a December 62.50/67.50 bear-call credit spread for a 25-cent credit. That's a potential 5.3% return (30.5% annualized*) and the stock would have to rise 8.9% to cause a problem.
Covered Call Trade
If you like the stock, but wish to lower your cost basis on a new position, you may want to consider a January $657.50 covered call. Buy MSFT shares (typically 100 shares, scale as appropriate), while selling the January $57.50 call for a debit of $55.25 per share. The trade has a target assigned return of 4.0%, and a target annualized return of 14.6% (for comparison purposes only).
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