Microsoft (MSFT) Technical & Fundamental Analysis


Chart done on daily timeframe. It is amazing to see a growth company that has existed for so long yet still growing as if customers are just discovering its products. Microsoft is one of those companies that has something special about it and has managed to dominate in its industry despite fierce competition. This dominance didn’t go unnoticed in 2023 as buyers flooded the stock and took it to its recent new all time highs near 367.00, also making it one of the market leaders this year. 

Fundamental analysis:

Fundamentally, Microsoft is growing immensely. The company’s revenue has more than doubled in the last six years to a massive 212B TTM (trailing twelve months). Many companies grow in revenue, but their bottomline shrinks, but this is not the case for Microsoft as their net income as grown along side their sales. Their asset to liability ratio is very healthy at 2:1, the company has over 400B in assets that makes them a giant, but more importantly they also have close to 60B in free cash flow. Free cash flow is key to a company’s survival, especially in the tech industry where cash is necessary for research and development to stay ahead of competition. On a scale of 1-5, Microsoft score a perfect 5 fundamentally. 

Technical analysis: 

Microsoft is currently trading at a price to earnings ratio of 35, and the tech industry average P/E ratio is currently 35.82, but software stocks in specific right now have an extremely high P/E ratio of 390. A healthy P/E for most tech stocks is between 15-25, 25 considered “expensive” or over-valued, but although Microsoft is at 35, this doesn’t discourage us from buying or holding the stock. Microsoft’s growth has proven to be exponential so the current price is still considered a healthy one when taking into account future growth. The company might need a future correction on its charts, but long term it is a great choice an is likely to see higher targets in the years to come.