Microsoft (MSFT Stock) earnings reports: Another upside surprise?

One of the many top companies reporting their quarterly financial earnings this week is Microsoft (MT5: #Microsoft). Microsoft is slated to release their second quarter fiscal results on 26 January after market close. Expectations are high as most of the technology companies have seen their financial results increase during the Covid-19 pandemic due to the increased adoption of the technology products and services as people were forced to work from home and schools turned to remote learning.

Even though Microsoft's business has faced challenges in the pandemic, such as its on-premise server business and its LinkedIn social network, its Intelligent Cloud business is expected to be the savior for the stock's strong return over the year to date. Microsoft's cloud platform business ‘Azure' revenues surged 47% on a y/y basis in the last reported quarter andthe trend is expected to continue in this quarterly report as the 2nd wave and 3rd wave of the coronavirus enforced the solid uptake in the cloud computing solution. Microsoft's Azure is a recurring subscription business model which will increase the company revenue. Microsoft is also expected to benefit from the gaming business as the company recently released two new Xbox gaming consoles — the X Box Series S and X Box Series X — for which it was expecting strong demand.

Microsoft is projected to pass $40 billion for the first time in its history, with growth of 8.7% from the prior-year quarter. Its fiscal second-quarter earnings are expected at $1.64 per share, increased 8.6% from the year-ago reported figure (Zacks.com). In the same period a year ago, the company posted earnings of $1.51 a share on sales of $36.9 billion. Notably, the company has reported an earnings upside surprise in the last seven quarters.

Interestingly, Goldman Sachs, Evercore ISI and Morgan Stanley secured Microsoft's place in Wall Street's good graces last week, with Goldman initiating coverage of the stock as a buy, Evercore adding it to its tactical outperform list and Morgan Stanley calling it its top recovery pick. Wedbush lifted its price target on Microsoft stock to $270 from $260 over the next 12 months.

From the technical perspective, it has been a bullish year for #Mirosoft shares; its price reached an all-time high at $232.85 in September 2020 and has only slightly declined since then. It currently trades at $229.59 (Monday Close). The #Microsoft share price has risen ~40% year to date. The general trend is currently bullish. The momentum is on the upside as it recently rebounded from 50-DMA and 200-DMA is also pointing to the upside. The historical high $232.85 will be the key psychological resistance level for the share. Fib retracement 23.6% ($209.17) has been strong support for the past couple months. The 14-day RSI indicator is currently above the 50 level at 65.57.