Will Microsoft See a Benefit from Its Recent Purchase?

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With shares of Microsoft (NASDAQ:MSFT) trading around $31, is MSFT an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework.

T = Trends for a Stock’s Movement

Microsoft is engaged in developing, licensing, and supporting a wide range of software products and services. The company also designs and sells hardware, and delivers online advertising to customers. It operates in five segments: Windows and Windows Live, Server and Tools, Online Services Division, Microsoft Business Division, and Entertainment and Devices. As a mature company, Microsoft is also offering a stable dividend, which is currently yielding around 2.92 percent annually.

Microsoft agreed to purchase Nokia’s (NYSE:NOK) mobile phone unit, patents, and mapping services for a total of $7.2 billion. Nokia’s phones already use Microsoft’s Windows Phone software. The company’s Canadian head, Stephen Elop, will lead Microsoft’s mobile devices unit, and his name has even been tossed around as a possible replacement for retiring Microsoft CEO Steven Ballmer. Nokia used to dominate the mobile phone market, but has since fallen far behind rivals Apple (NASDAQ:AAPL) and Samsung in the highly competitive market.

T = Technicals on the Stock Chart Are Mixed

Microsoft stock has been fairly volatile in the past several months. The stock is currently trading down near breakout levels, so it may need some time to settle. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Microsoft is trading between its key averages, which signals neutral price action in the near term.

MSFT

Source: Thinkorswim

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