Has Microsoft Stock Peaked With FY 2021 Earnings Nearby?

MSFT: Microsoft logo

Microsoft (NASDAQ: MSFT) is scheduled to report its fiscal Q4 2021 results on Tuesday, July 27. We expect MSFT to beat the consensus estimates for revenues but miss for earnings. The company has reported better than expected revenues and earnings figures in each of the last four quarters. In the first nine months the company has seen revenue growth 16% y-o-y led by the Intelligent Cloud segment growing by more than 22% y-o-y. We expect the Intelligent Cloud segment to end the year at a high by maintaining the growth in the fourth-quarter FY2021 results, as well. Our forecast indicates that Microsoft’s valuation is around $292 per share, which is around 4.5% above the current market price of $279. Look at our interactive dashboard analysis on Microsoft’s pre-earnings: What To Expect in Q4? for more details. 

(1) Revenues expected to be ahead of consensus estimates in Q4

Trefis estimates MSFT’s fiscal Q4 2021 revenues to be around $42.64 billion, 4% above the $41.03 billion consensus estimate. MSFT’s revenue growth has been led by the Intelligent cloud segment for the first nine months of FY 2021 (ended June 2021). We expect the momentum to continue in the last quarter of FY2021. Overall, we expect revenue of around $164.6 billion in FY2021. Our dashboard on Microsoft‘s revenues offers more details on the company’s segments.

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(2) EPS likely to miss the consensus estimates

MSFT’s Q4 2021 earnings per share (EPS) is expected to be $1.30 per Trefis analysis, below the consensus estimate of $1.77. The company’s net income margin is expected to be higher in FY 2021. Altogether, the company is likely to report an EPS of around $7.19 in FY2021.

(3) Stock price estimate 4.5% above the current market price

Going by our Microsoft’s valuation, with an EPS estimate of around $7.19 and a P/E multiple of 40.6x in fiscal 2021, translates into a price of $292, which is 4.5% above the current market price of around $279.

Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year

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