THE MICROSOFT INVESTOR: The Bulls Are Back As Sentiment Turns Positive

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MSFT Slips As Market Tanks
Although Microsoft fought its way back to a market cap greater than Apple’s yesterday and sentiment is turning more positive, shares are off today as bellwether stocks GS and IBM miss investor expectations and drag down the market. Microsoft will announce second quarter earnings after the market close on Thursday, July 22. Other catalyst include the company’s upcoming analyst day on Thursday, July 29 and upgrade cycles of Office 2010 and Windows 7. The stock currently trades at 13x 2010E P/E, inexpensive compared to historical trading multiples.

Wall Street Bullish On Microsoft As Shares Sag (Barron’s)
Analysts early to the preview party:

  • Brent Thill at UBS raised his Microsoft estimates on early signs of enterprise demand returning. Europe (~35% of revenues) was stronger than expected and key enterprise demand indicators like desktop sales signaled that global enterprise demand is returning. He reiterates his Buy rating and $38 price-target.
  • Citigroup analyst Walter Pritchard reiterated his Buy rating shares of MSFT, although he cut his price target to $31 as comparisons across the software sector worsen. He expects tablets, cloud computing and online to be the focus of the company’s upcoming financial analysts meeting (on July 29). Sentiment is not likely to worsen, and Pritchard sees a solid quarter and the upcoming meeting as a “modest positive catalyst.”

The Daily Trader: MSFT Is Cheap With Bullish Sentiment But Expectations Are High (Various)
Some opinions on the stock:

  • Here’s a $25 stock, with 17% of that value made up of cash and an enterprise value of about $21 per share. That’s 11 times trailing earnings, which is perfectly insane given how low interest rates are. (The Motley Fool)
  • There is bullish pressure building in shares of Microsoft as the stock has an up / down money flow ratio of 199/100. The question is, will increasing bullish sentiment help turn things around and start pushing the stock price higher? (Learning Markets)
  • Investors are probably better off not accumulating shares ahead of earnings on Thursday as shares are liable to sell off due to high expectations and selling on the news. But, generally speaking, shares do seem attractive at current levels. (Wall St. Cheat Sheet)

Mixed Technical Reviews Are In For Windows Phone 7 Ahead Of Launch (The Wall Street Journal)
The critics are mixed on Microsoft’s Windows Phone 7. Reviews range from no real innovation to game changer. For Microsoft, which is playing catch-up in the smartphone market, it just has to be good enough to get them into the game. Like Bing. Check out various reviews here.

Can Microsoft Replicate The Success Of Wii? Not Likely (CNBC)
For Microsoft’s motion-based answer to Nintendo’s Wii, Kinect’s success is a question of price. The estimated $150 price brought about a lot of criticism. Microsoft is still telling publishing partners it expects to sell five million Kinect devices before the close of its fiscal year. However, at $150 a pop, analysts think the product is doomed.

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