With many major tech stocks down over the last month, traders agree that this 1 big tech name is a buy on the weakness. Here’s why.
Tech stocks have come under pressure over the last month.
After hitting a new all-time high on April 26, the Nasdaq has since fallen nearly 3% as some of the market’s biggest tech names have slipped lower. Apple (NASDAQ: AAPL) shares are down almost 7% in the same timeframe, Amazon (NASDAQ: AMZN) is down more than 5%, Microsoft (NASDAQ: MSFT) has dropped 5%, and Tesla (NASDAQ: TSLA) has sunk 17%.
But of those big tech names, Simpler Trading’s Danielle Shay says there’s one among them that’s a better pullback buy than the others.
“I love Microsoft,” Shay, the firm’s director of options, said. “It’s one of my favorite long-term growth stocks. It’s just so consistent. They have so many different product segments that are continuing to grow. Earnings are consistent quarter over quarter year over year.”
Microsoft delivered a big earnings beat late last month, posting earnings per share of $1.95 on revenue of $41.71 billion, versus analysts’ estimates for earnings of $1.78 per share on revenue of $41.03 billion. The company also said it is expecting $43.6 billion to $44.5 billion in revenue in its fiscal fourth quarter—beating the consensus estimate of $42.98 billion—representing 16% growth at the middle of that range.
“I think this is a fantastic pullback buy,” Shay added. “It bounced gorgeously at the [100-day moving average], and I’m targeting $270 in the near term.”
Shay’s $270 target indicates roughly 8% upside from the price as of this writing, but one analyst says the stock could surge much higher.
Rosenblatt Securities analyst John McPeake recently initiated coverage of Microsoft with a Buy rating and a $301 price target – 20% higher than the current price.
“Microsoft is the most important software company on the planet, with over 1.3 billion devices running Windows 10, over 1.2 billion users of Microsoft Office, 1.2 billion identities in their Azure Active Directory, and a 10-fold increase in daily active Teams users in just the last year to 145 million,” McPeake said in a note.
McPeake added, “over even just the last five years… Microsoft’s revenue composition has moved in a direction that we think supports [a] significantly higher absolute earnings multiple. At this point, Microsoft has far higher revenue visibility and repeatability, which we think increases the long-term valuation of the company substantially versus its historic averages.”
As for the technical picture, Piper Sandler chief market technician Craig Johnson says the chart looks good.
“This is a bullish chart,” Johnson said. “We just pulled back right toward the lower end of this upward trending price channel and it looks like one that should be bought.”