Microsoft Stock Price: Bullish Trends Anticipated – An Algorithmic Perspective

Microsoft Stock Price

  • Microsoft Corporation, an American multinational microsoft stock newscentered on computer software, certain electronics, personal computers, and, newly, cloud and mobile technologies, has become widely known for Office, Xbox, MSN, and other offerings
  • From 2000 to 2013, however, Microsoft was seen as a lagging corporation; it took new CEO Satya Nadella to revitalize Microsoft’s direction, enter emerging markets, and regain investor interest
  • While Nadella’s Microsoft delivered where revenue and EPS are concerned, investors found FY15 Q2 results disappointing, particularly with respect to Windows; as such, Microsoft share prices have declined
  • While sentiment may not presently be too bullish, Microsoft has its positives: specifically, its otherwise solid financial improvements, novel leadership, and entrance into emerging technologies are all assets
  • The I Know First algorithm predicts bullish trends for Microsoft in the three-month time frame

Company Profile: Microsoft Corporation

Microsoft Corporation (NASDAQ: MSFT) is an American multinational centered on manufacturing and selling computer software, assorted electronics, personal computers, and services that has become a household name for its software products (e.g., the singularly popular Microsoft Office suite, Bing, and instant messenger MSN), its flagship hardware products (i.e., the Xbox gaming consoles and the Microsoft Surface tablet line), and its prominent founder, Bill Gates. At present, it has been recognized as both the world’s largest software maker by revenue, and one of the world’s most valuable companies; it also dominates the market where both PC-compatible operating systems and office software suites are concerned. Microsoft has several successful acquisitions to its name, including Skype Technologies, its largest buy to date, costing the company $8.5 billion.

Unfortunately, for several years (namely, from 2000 through to 2013), Microsoft was seen as a significantly lagging corporation: ex-CEO Steve Ballmer seemed to avoid emerging markets, and often encouraged divisions to oppose one another. After Satya Nadella’s first year as Microsoft’s new CEO, however, it seems that the corporation is in line for a revitalization.

The Current Situation:

Despite the fact that Microsoft is now turning into a company to watch once more, it’s received relatively poor reception in recent months, given that its second-quarter financial report was minutely disappointing. While earnings per share and revenue were sufficient, Windows – an integral component of the Microsoft business – was not performing as planned.

As such, while Microsoft had outperformed the market for the majority of recent years, its shares fell considerably January through February.

The Positives: ­Solid Figures, Satya Nadella, Cloud & Mobile Improvement, Wearables, & Windows 10

While some investors may be disappointed where Windows is concerned, it’s quite possible to see a lot of merit in Microsoft, at present.

For one, the corporation’s other financial results for Q2 FY15 were relatively positive. The company’s annual GAAP revenue improved, rising to $26 470 million from $24 519 million in 2013. Gross margins also went up, from $16 197 million in 2013 to $16 334 million in 2014. Specific divisions of revenue grew, as well, with Devices and Consumer revenue rising 8% to $12.9 billion, and commercial revenue growing 5% to $13.3 billion. Further, certain products were tremendously successful: Microsoft Surface, for one, was up 24%, with the Surface Pro 3 and assorted accessories fueling most of this increase. Office 365 subscriptions were also up 30%. Many other consumer products and services also did well: Bing U.S. market share expanded 19.7%, about 10.5 million Lumia units were sold, and Xbox sales totaled 6.6 million units! Commercial revenue growth was dominantly driven by Office 365, Azure, and Dynamics CRM Online, all of which elevated it; Kevin Turner, Microsoft’s Chief Operating Officer, notes that cloud products in particular saw an abundance of “enthusiasm and demand”.

Microsoft’s management has, since our last article, also proven to harbor the merit we assigned it. As analyst Michael Robinson puts it, “Great companies have great operations”; in the last year, Microsoft’s leadership has been revitalized by CEO Satya Nadella’s presence. While ex-CEO Steve Ballmer was seen as a bit of a liability, elevating Microsoft’s stock by just 33% over the course of ten years (and, consequently, causing Microsoft to lag behind the S&P), Satya Nadella is being hailed as “the right CEO at the right time”: from February 4th, 2014, to January 15th, 2015, Microsoft’s stock was up 25%, outpacing the S&P 500’s 13% return over the same period. He’s been hailed as someone with an international perspective, and his recent business developments have had results: Nadella, for example, catalyzed the 14% reduction to Microsoft’s workforce that, at present, seems to have taken the company’s market cap. past Google’s for the first time since 2013. Nadella also emphasizes cloud computing and mobile: two markets that, rapidly growing, were not a focus at Ballmer’s Microsoft; in fact, Microsoft’s commercial cloud revenue has risen 114% just this year, and Office 365 – Microsoft’s subscription-based Office service – has more than 9.2 million subscribers. Where mobile is concerned, Microsoft’s Surface-related revenue is also satisfactory – it’s risen 24% annually, up to $1.1 billion. Finally, handset unit sales have improved to 10.5 million. Nadella hasn’t just contributed to elevated figures, however – he’s made large-scale operational changes that reflect a range of Microsoft divisions and partnerships. He has, for example, stopped trying to make Microsoft Windows-exclusive – acknowledging that many people utilize Android and Apple iOS devices, Nadella – unlike Ballmer – hasn’t attempted to outdo Apple (NASDAQ: AAPL) and Google: instead, he’s tried to forge partnerships that make popular Microsoft products available across the board. In a similar vein, he’s annihilated the mean-spirited and thoroughly unprofessional Scroogled advertising campaign, which ridiculed Google’s privacy policies in a noticeably weak attempt to drive customers away from one of Microsoft’s largest competitors. Finally, while Ballmer’s Microsoft was dominated by divisions working against one another rather than together, Nadella has tried to fuel projects like Surface Hub, which is a result of the Windows, Surface, Skype, and Office teams working together rather than independently (and, perhaps, a bit antagonistically).

Microsoft is not just innovating where its operations and reign in emerging markets are concerned, however: it’s also releasing novel products and services that may pique the interests of consumers, elevating sales. For one, in a move that coincides well with its focus on novel markets like cloud computing and mobile, Microsoft has begun to dabble in wearables; for example, very limited quantities of a product known as Microsoft Band – a watch that, geared mostly at ameliorating your fitness, helps you track heart rate, steps, calorie burn, and sleep quality (supplying health-oriented with e-mail previews and calendar alerts too, of course) – became available again for purchase on March 6th. Band has, according to International Business Times, been a “very popular wearable device”: so much so, in fact, that it’s out of stock in the online Microsoft Store; this restocking move coincides with and – perhaps a bit too conveniently – pre-empts Apple’s launch of Apple Watch, a competing product. Band is also compatible with all three popular smartphone operating systems (representing, incidentally, another one of Nadella’s innovative moves: cooperation and integration (rather than unrelenting competition) with competitors for furtherance of mutual benefits), making it potentially desirable for a large audience. As another example, Windows 10 is out and about; while Microsoft has many novel divisions to its name, Windows is still an important aspect of the corporation’s business, as is evidenced by the disappointment investors expressed in response to poorer-than-expected productivity where Windows was concerned earlier this year. In addition to its harboring a few new features, Windows 10 will be available as a free upgrade for consumers with Windows 7 or 8; though this may look like an unintelligent business move, given that it’s sure to cost Microsoft short-term revenue, giving away upgrades could be useful to establishing a critical volume of users for the new edition, thus eventually increasing popularity and related PC sales. BCG Partners analyst Colin Gillis concurs, noting that Windows 10 might be “the best opportunity yet for Microsoft to come back in the game in mobile.

Analysts also appear to be thinking positively, despite Microsoft’s aforementioned, comparatively “disappointing” recent results. Yahoo! Finance analysts, for one, have given the company a mean 2.7 out of 5.0 recommendation, where 1.0 is a strong “buy” and 5.0 is a strong “sell”. In others words, while sentiment isn’t overwhelmingly positive, analysts concur that Microsoft is worth holding on to, for now (Figure 1).

microsoft stock price

Figure 1. Yahoo! Finance analysts rate Microsoft Corporation a 2.7 out of 5.0: a “hold”, in other words.

Algorithmic Perspective:

While algorithmic analysis is not to be considered conclusive, it is useful when combined with traditional techniques. Where such stocks as MSFT are concerned, algorithmic analysis – which relies upon historical trends and other information – can be especially useful in carefully piecing apart one’s investment decisions, which may otherwise be subjective to surrounding (in this case, overwhelmingly positive) bias.

I Know First is just one investment firm that uses an advanced self-learning algorithm based on artificial intelligence, machine learning, and artificial neural networks to supplement its fundamental analyses. In doing so, it predicts the flow of money in almost 2,000 markets across a range of time frames (e.g., 3-days, 1-month, 1-year). It should be noted that the algorithm’s predictability (i.e., its accuracy) becomes stronger in 1-month3-month, and 1-year forecasts; as such, it can – when coupled with traditional analysis and careful reasoning – most effectively be used to analyze both short-term and long-term trends, but is not as convenient where intraday trading is concerned. The algorithm has seen a high degree of accuracy. As such, while it may seem tempting to disregard its predictions, cross-checking with its suggestions can be helpful in deciding where to place your money.

To further analyze Microsoft’s outlook, I Know First’s algorithm was used to generate a new, three-month forecast for the corporation on March 1st. Bright green signifies a highly bullish signal; light green also indicates that the forecast is bullish, but not as strongly so. Bright red, in turn, signifies a bearish forecast; correspondingly, light red indicates a bearish forecast as well, but not as negative a forecast. Each compartment contains two numbers: the strength of the signal itself (represented by the number in the middle of each box, to the right), and its predictability (found in the bottom left corner, this is the approximate level of confidence the algorithm has in the forecast).

microsoft stock news

Figure 2. Newly updated three-month forecast for Microsoft, last predicted March 1st, 2015; MSFT, boxed in purple for emphasis, has been deemed bullish in the months to come; this coincides with fundamentals.

Microsoft’s position on the algorithmic chart, then, indicates a strongly bullish signal for the company in the three months to come; in the short term, of course, this signal may not be as accurate, but this appears to coincide well with the hold recommendations discussed above.


Cumulatively, then, Microsoft Corporation appears to still be a stock to watch. While investors may well have been disappointed at FY15 Q2’s Windows-related results, the remainder of the corporation’s financial results in FY15 Q2 were successful: revenue and EPS improved, with key consumer products and services (e.g., Office 365, the Surface line, Bing, and Lumia) seeing improvements in terms of sales and subscriptions. Satya Nadella’s improvements to operations have also, it appears, been going as planned, with Microsoft’s market cap. surpassing Google’s (NASDAQ: GOOG)! New products and services are also making headlines: specifically, Microsoft Band has seen significant popularity, and Windows 10 will be available as a free upgrade to all current Windows 7 and Windows 8 users. All this, in combination with analyst opinion and I Know First’s algorithmic forecast, suggests that, while Microsoft may not be on the top of its game, it’s still a corporation worth following – and, potentially, holding on to – in both the short- and the long-term future.