Is Trending Stock Microsoft Corporation (MSFT) a Buy Now?

Microsoft (MSFT) is one of the stocks most watched by Zacks.com visitors lately. So, it might be a good idea to review some of the factors that might affect the near-term performance of the stock.Shares of this software maker have returned +6.7% over the past month versus the Zacks S&P 500 composite's +1.1% change. The Zacks Computer - Software industry, to which Microsoft belongs, has gained 5% over this period. Now the key question is: Where could the stock be headed in the near term?Although media reports or rumors about a significant change in a company's business prospects usually cause its stock to trend and lead to an immediate price change, there are always certain fundamental factors that ultimately drive the buy-and-hold decision.Earnings Estimate RevisionsRather than focusing on anything else, we at Zacks prioritize evaluating the change in a company's earnings projection. This is because we believe the fair value for its stock is determined by the present value of its future stream of earnings.Our analysis is essentially based on how sell-side analysts covering the stock are revising their earnings estimates to take the latest business trends into account. When earnings estimates for a company go up, the fair value for its stock goes up as well. And when a stock's fair value is higher than its current market price, investors tend to buy the stock, resulting in its price moving upward. Because of this, empirical studies indicate a strong correlation between trends in earnings estimate revisions and short-term stock price movements.For the current quarter, Microsoft is expected to post earnings of $3.14 per share, indicating a change of +7.2% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.5% over the last 30 days.The consensus earnings estimate of $12.93 for the current fiscal year indicates a year-over-year change of +9.6%. This estimate has changed -0.1% over the last 30 days.For the next fiscal year, the consensus earnings estimate of $14.78 indicates a change of +14.3% from what Microsoft is expected to report a year ago. Over the past month, the estimate has changed -0.1%.With an impressive externally audited track record, our proprietary stock rating tool -- the Zacks Rank -- is a more conclusive indicator of a stock's near-term price performance, as it effectively harnesses the power of earnings estimate revisions. The size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, has resulted in a Zacks Rank #3 (Hold) for Microsoft.The chart below shows the evolution of the company's forward 12-month consensus EPS estimate:12 Month EPSProjected Revenue GrowthEven though a company's earnings growth is arguably the best indicator of its financial health, nothing much happens if it cannot raise its revenues. It's almost impossible for a company to grow its earnings without growing its revenue for long periods. Therefore, knowing a company's potential revenue growth is crucial.In the case of Microsoft, the consensus sales estimate of $68.75 billion for the current quarter points to a year-over-year change of +10.9%. The $277.69 billion and $315.51 billion estimates for the current and next fiscal years indicate changes of +13.3% and +13.6%, respectively.Last Reported Results and Surprise HistoryMicrosoft reported revenues of $65.59 billion in the last reported quarter, representing a year-over-year change of +16%. EPS of $3.30 for the same period compares with $2.99 a year ago.Compared to the Zacks Consensus Estimate of $64.41 billion, the reported revenues represent a surprise of +1.82%. The EPS surprise was +7.14%.The company beat consensus EPS estimates in each of the trailing four quarters. The company topped consensus revenue estimates each time over this period.ValuationNo investment decision can be efficient without considering a stock's valuation. Whether a stock's current price rightly reflects the intrinsic value of the underlying business and the company's growth prospects is an essential determinant of its future price performance.While comparing the current values of a company's valuation multiples, such as price-to-earnings (P/E), price-to-sales (P/S) and price-to-cash flow (P/CF), with its own historical values helps determine whether its stock is fairly valued, overvalued, or undervalued, comparing the company relative to its peers on these parameters gives a good sense of the reasonability of the stock's price.As part of the Zacks Style Scores system, the Zacks Value Style Score (which evaluates both traditional and unconventional valuation metrics) organizes stocks into five groups ranging from A to F (A is better than B; B is better than C; and so on), making it helpful in identifying whether a stock is overvalued, rightly valued, or temporarily undervalued.Microsoft is graded D on this front, indicating that it is trading at a premium to its peers. Click here to see the values of some of the valuation metrics that have driven this grade.ConclusionThe facts discussed here and much other information on Zacks.com might help determine whether or not it's worthwhile paying attention to the market buzz about Microsoft. However, its Zacks Rank #3 does suggest that it may perform in line with the broader market in the near term.Zacks Naming Top 10 Stocks for 2025Want to be tipped off early to our 10 top picks for the entirety of 2025?History suggests their performance could be sensational.From 2012 (when our Director of Research Sheraz Mian assumed responsibility for the portfolio) through November, 2024, the Zacks Top 10 Stocks gained +2,112.6%, more than QUADRUPLING the S&P 500’s +475.6%. Now Sheraz is combing through 4,400 companies to handpick the best 10 tickers to buy and hold in 2025. Don’t miss your chance to get in on these stocks when they’re released on January 2.Be First to New Top 10 Stocks >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Microsoft Corporation (MSFT): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks