Microsoft Jumps On Upbeat Earnings Results – But Be Careful Traders

Shares of Microsoft rallied to the level they have not seen since the heyday in 1999 in after-hours trading on Thursday. The stock soared about 6% after the software giant reported quarterly revenue that beat Wall Street’s expectations by more than 12%.

Microsoft posted $22.33 billion in revenue for its first quarter in fiscal 2017, up 3.1% from the same quarter last year. The result topped analysts’ consensus of $21.69 billion.

Revenue generated from the Windows products was flat as the PC market continued to stagnate, while Lumia smartphone sales also declined. Total revenue of the unit that includes Windows software and mobile business dropped 1.8% to $9.29 billion. According to market sources, Microsoft’s worldwide PC shipments fell 3.9 percent in the quarter ended Sept. 30.

Nonetheless, the technology company’s bottom line was supported strongly by the Office 365 and Azure cloud-computing services that grew at a good clip. Sales from Microsoft’s flagship cloud product Azure, which businesses can use to host their websites and data, rose 116% to $6.4 billion. Revenue from its broader “Intelligent Cloud” business also witnessed an increase of 8.3% to $6.38 billion.

While cloud technology is setting Microsoft apart from smaller rivals, it was not the only secret that stood behind Microsoft’s big profit beat. Last month, Microsoft said its board had approved a stock buyback plan of up to $40 billion. By lowering the overall outstanding share count to 7.88 billion from 8.08 billion a year ago only, Microsoft’s earnings per share were effectively boosted by 2 cents. That is the reason why the Redmond, WA-based company still registered net income of $0.76 per share, which is 6 cents higher than that in the same quarter a year ago, while its revenue did not gain considerably.


Fig: Microsoft D1 Technical Chart

Microsoft’s shares have been trading in a range between the support at 56.08 and the resistance at 58.62 for three months. ADX index has been moving under 20 level, indicating no clear trend in the market. The prices are moving back and forth a couple of moving averages that has twisted for a while. With the rise in extended-hour trading, Microsoft stocks are going to create a wide gap up.

Trade suggestion

Sell Limit at 60.40, Take profit at 58.70, Stop loss at 61.10

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