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Microsoft earnings jumped 31%
for the third quarter over the same period last year to
$5.23 billion and Microsoft stock prices moved from a low of
26.40 to a high of 26.87 on the news.
Microsoft stock prices
have been waning as of late . Earnings came in at .61 cents
a share versus last year's .45 cents a share, however
overall for the first time, Apple's earnings outpaced those
of Microsoft. Microsoft stock has worked its way higher in
the last few sessions in preparation for the third quarter
results. After hours the initial reaction was good. The latest Microsoft stock quotes were running at
26.87 when I wrote (Apr 28 2011) this article. I expect
Microsoft stock quotes will be back to below 26 tomorrow
(Friday Apr 29) after many analysts have a field day with the Microsoft
financial earnings report as there is some details in the
third quarter results that may alarm some investors.
The chart below shows Microsoft
stock prices since the beginning of the year. Those who buy
Microsoft stock must be disappointed. Those of us who sell
Microsoft stock options must be delighted. Today's collapse
in Microsoft stock value just follows Microsoft stock
history patterns. Run up on the news and then sell after it. The
chart below shows Microsoft stock history since January
2011. The clear run up in prices to yesterday's earnings
announcement from just a few session ago is very evident.
Microsoft stock though has not
had a stellar 6 months and in my report I am going to review
where I think the stock is headed or at least the best
strikes I can continue to sell Microsoft stock options at.
For the first time I may combine my selling puts with
selling calls to my Microsoft stock options strategy. For those who buy
Microsoft stock, this report may assist in determining
points where you could buy Microsoft stock and sell it
perhaps multiple times during the year. Insider reports show
that many company directors continue to buy Microsoft stock
and sell the stock at various prices and at various times so
there does not seem to be any pattern with regards to
Microsoft earnings and Microsoft stock prices. Of particular interest is the
story that earnings are telling about the overall PC
market in general and Microsoft in particular.
Sales of the windows 7 operating
system continue with the highest numbers of all Windows operating
systems to date but they are still down by around 3%. Microsoft
earnings show that the core operating system sales are
slipping. This has to be a clear indication that the
consumer is making a shift to tablets like the Apple Inc. ipad
and the Research In Motion Playbook which do not require the
Microsoft operating system. Meanwhile Microsoft's version 8
of the windows operating environment is being designed to
also run on tablet pc's but it remains to be seen how soon
it will come out.
The big change is with the
gaming division where the Kinect home controller made huge
inroads as revenue on gaming items was up 60 percent and
more than 2.4 million units were sold in the third quarter
alone.
Office 2010 is the fastest
selling office version yet and sales were up another 21
percent. However Bing and MSN portal saw its revenue up 14
percent but still posted a loss of 726 million. This unit
continues to lose money quarter after quarter for Microsoft
and it is questionable in my mind how long Microsoft will
keep allowing these losses.
So this brings me to where I think
Microsoft's stock may go from here. Let's review the
Microsoft Stock Report by looking at some of the
fundamentals of Microsoft.
Earnings are at $2.36
Book Value is $5.77
Cash Flow is an impressive $2.76
Price/Earnings is at 11.2X
Price/Cash is at an impressive 9.6X
Gross Profit Margin is an incredible
79.16%
Profit Margin is also incredible at
30.84%
How about Management Effectiveness?
Return on Assets is at 23.59%
Return on Investment is a very nice
33.07%
Dividend Yield at the time of writing
this article is 2.43%
The Payout Ratio is a very healthy
24.1X which tells me there are years of dividend payments
ahead
Financial Strength is also impressive
Debt To Capital is 11.40%
Market Cap is presently at 221.7B (it
fluctuates with the stock valuation)
Microsoft Stock Quotes: 52 week range
$31.43 - $22.73
So while it's not all good news from
Microsoft, earnings are up and things remain solid. The
fundamentals show a very strong company and the Microsoft
Stock Dividend is very good and continues to increase
yearly..
The earnings chart below from my Microsoft
Stock Report shows the Microsoft stock history for the 5
years. The earnings back in 2007 were not nearly as good as
present earnings these past few quarters yet Microsoft stock is
not rising. Today the stock closed at 26.87 and then sold
off after hours when the earnings came out, which is typical
of stocks as they run up during the days leading to
earnings.
The earnings chart is not
particularly encouraging for investors who are seeking a
rise in the stock valuation. As a stock continues to earn
more, the stock should climb, but Microsoft is different.
Investors remain worried about the future and with that
worry comes hesitation. There is no rise in this stock and
looking out, I believe that Microsoft stock history for the
past 5 years will remain constant - the trading range will
continue.
You can tell just quickly looking at the chart
that as long as those who buy Microsoft stock do so on the
dips as it were, they will have done well. Those who buy
Microsoft stock without looking at the Microsoft stock
prices history, do so at their peril and could be end up with
losses. The Microsoft stock chart below tells the story about Microsoft stock
valuations. You can readily see the importance of looking at
charts. A historical perspective tells me there is no need
to buy this stock over $26.50.
Continued In Part 2
