Shares of Microsoft Corp (NASDAQ: MSFT) have been a cornerstone of tech portfolios for many years now, and 2024 has done little to tarnish that reputation. The stock is up a solid 15% year-to-date, and while it's struggled to push past July's all-time high, there are several reasons for investors to be excited.
Chief among these is the fact that analysts are exceedingly bullish on the tech titan's prospects heading into 2025. With the stock trading in a narrowing range, we could soon be looking at a breakout. Its shares are currently less than a 10% move away from July's high, so let's jump in and see what could send them soaring past it in the coming weeks.
Microsoft's Fundamental Performance Continues to Impress
For starters, there's the company's impressive fundamental performance. Microsoft has consistently beaten analyst expectations for its earnings for over two years, with this trend continuing with its most recent report at the end of last month. That report saw the company smash expectations for both headline numbers, with revenue growth standing out with a 16% year-on-year gain.
Investors should expect further gains heading into the rest of the year, as the holiday quarter historically tends to be Microsoft's strongest.
Bullish Analyst Updates Keep Microsoft in the Spotlight
Building on the fact that the internals are ticking over nicely, always a good starting point when considering a stock, is the fact that several analysts have been calling Microsoft a red-hot buy right. The teams at Royal Bank of Canada, UBS Group, and JPMorgan, to name just a few, have all reiterated their Buy ratings or equivalents in the past month alone. These updates echo a broader sentiment among analysts who have been consistently bullish on Microsoft throughout 2024.
Just last week, the Wedbush team doubled down on their bullish outlook for Microsoft, reiterating a Buy rating and a lofty $550 price target. From where the stock closed on Tuesday night, that's pointing to a targeted upside of nearly 30%. Needless to say, were Microsoft shares to hit that in the coming weeks, they'd be well above July's high and cruising into blue sky territory.
Potential Concerns: Analysts Reassess Microsoft Price Targets
While there is a lot of optimism about the stock, there are some notes of caution to consider. While maintaining their bullish ratings, some analysts have been reining in their price targets. For example, TD Cowen recently lowered theirs, citing higher capital expenditure forecasts. Still, the fact that they held off on doing a full downgrade from their Buy says enough about their confidence in the company's long-term prospects. Plus, even their revised $475 price target would have the stock trading at a fresh high.
For further counterbalance, it's worth noting that Morgan Stanley did the opposite with their price target on Microsoft shares and actually boosted it following last month's report.
Microsoft’s Technical Setup Suggests December Gains Are Likely
From a technical perspective, there's a lot to like as well. After months of steady consolidation and mostly sideways price action, the stock is now setting higher lows, a key indicator of building momentum.
Strengthening this thesis is the fact that Microsoft's MACD is on the verge of a bullish crossover, while its Relative Strength Index (RSI) is just 57. For context, the RSI is a popular technical indicator that measures the speed and magnitude of a stock's recent price changes to assess whether it is overbought or oversold. It runs on a scale of 0 to 100, with readings above 70 indicating overbought conditions and below 30 signaling oversold conditions. At 57, Microsoft's RSI suggests that momentum is firmly on the bull's side, and the stock has a lot of room to run before it could even be considered.
With the Fed cutting interest rates and broader indices like the S&P 500 currently at record levels, the macro environment also adds to the sense that a breakout to the north could be on the cards. Investors should look for the stock to continue setting higher lows into December, with a move above $440 all but confirming the breakout has begun.
