Microsoft Stock Has Gained Almost 20% Over The Last Quarter, Is There More Room To Run?

by Trefis Team
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Microsoft (NASDAQ:MSFT) stock is up by close to 20% over the last quarter, rising from levels of about $135 in early October 2019 to around $161 now. Could the stock gain another 10% over the next month? Or, is it time to sell – what’s the chance the stock could, in fact, lose 5% over the next month?

Turns out, after scoring a 20% gain over a quarter, there is only about a 4% chance of another 10% increase in Microsoft’s stock over the next month. In fact, the chances of a 5% loss over the next month are much higher at about 24%, and goes up to 51% over the next quarter.

Curious about the possibility of a 10% rise over the next quarter? Test the Trefis Machine Learning Engine for Microsoft stock to see chances of rise or drop.

In addition, Microsoft earnings are expected around the 29th of January. If the company misses expectations, and stock drops, say 5% – could it recover from that drop in a month? According to the Trefis machine learning engine, chances of a rebound in Microsoft stock after a 5% drop over a week, are about 8% over a week’s time, and go up to almost 19% if you wait for a month! See how this compares with S&P 500 in our separate Machine Learning Analysis of the S&P 500

 

In addition, below we discuss other interesting scenarios and how to make the most of the Trefis machine learning engine

Question 1: Does a rise in Microsoft stock become more likely after a drop?

Answer:

Consider two situations,

Case 1: Microsoft stock drops by 5% or more in a week

Case 2: Microsoft stock rises by 5% or more in a week

Is the chance of say a 5% rise in Microsoft stock over the subsequent month after Case 1 or Case 2 occurs much higher for one versus the other?

Yes. The chances of a 5% rise over the next month (21 trading days) is about 32% for Case 1, i.e. when Microsoft’s stock has just suffered a loss, versus about 24% for Case 2.

 

Question 2: What about the other way around, does a drop in Microsoft stock become more likely after a rise?

Answer:

Consider, once again, two cases

Case 1: Microsoft stock drops by 5% in a week

Case 2: Microsoft stock rises by 5% in a week

The chance of a 5% drop after Case 1 is about 22%, versus about 28% for Case 2. For comparison, in case of the S&P 500 and many other stocks, it turns out the chances of a 5% drop after Case 1 or Case 2 has occurred are actually quite similar. View our Machine Learning Analysis of the S&P 500

 

Question 3: Does patience pay?

Answer:

If you buy and hold Microsoft stock, the expectation is over time the near term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.

Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!

For after a drop of 5% in Microsoft stock over a week (5 trading days), while there is only about 18% chance the stock will gain 5% over the subsequent week, there is more than 46% chance this will happen in 3 months, and 54% chance it’ll gain 5% over a year (about 250 trading days).

The table below shows the trend for Microsoft stock:

 

Question 4: What about the possibility of a drop after a rise if you wait for a while?

Answer:

There are two opposing forces at work on Microsoft stock here. First, is the general positive bias for Microsoft stock (and for most other stocks) – that pulls the stock upwards with time. Second, the basic chance of a drop, as a chance of any event happening, should simply increase with the passage of time.

After seeing a rise of 5% over 5 days, the chances of a 5% drop in Microsoft stock are about 29% over the subsequent month of waiting (21 trading days) and this increases to 35% when the waiting period is a quarter (63 trading days). But the probability of a loss shrinks slightly if the waiting period is a year or more to 34%.

Related Analysis:

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