Microsoft (MSFT) Stock: Here’s Why It’s Tanking!

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Microsoft Corporation (NASDAQ: MSFT)

Microsoft Corporation is having a very rough day in the market today, and for good reason. The company recently reported its earnings for the third fiscal quarter of 2016, missing expectations and striking fear in the hearts and minds of its investors. Today, we’ll talk about the company’s earnings report, how investors reacted to the news, and what we can expect to see from MSFT moving forward. So, let’s get right to it…

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MSFT Reports Earnings: Misses The Mark!

As mentioned above, Microsoft reported its earnings for the third fiscal quarter after the closing bell yesterday. Unfortunately however, the report was anything but positive. Here’s what we saw from the report:

  • Revenue – In terms of revenue, MSFT unfortunately missed its mark. During the third quarter, analysts expected that the company would generate revenue in the amount of $22.11 billion. However, the company’s revenue actually came in well below this mark at $22.08 billion.
  • Earnings Per Share – Unfortunately, earnings per share weren’t much better than what we saw from revenue. In the quarter, analysts expected that MSFT would generate earnings in the amount of $0.64 per share. However, the company actually reported earnings in the amount of $0.62 per share.

While the earnings report was overwhelmingly negative, the CEO of the company, Satya Nadella believes that organizations using digital technology will help to drive future growth. In a statement, here’s what she had to say:

Organizations using digital technology to transform and drive new growth increasingly choose Microsoft as a partner… As these organizations turn to us, we’re seeing momentum across Microsoft’s cloud services and with Windows 10.”

The belief that business level services will help to grow revenue in the long run was echoed by Kevin Turner, the COO at MSFT. Here’s what he had to say:

Digital transformation is the number one priority on our customers’ agenda. Companies from large established businesses to emerging start-ups are turning to our cloud solutions to help them move faster and generate new revenue…”

How The Market Reacted To The News

As investors, one of the first things we learn is that the news moves the market. Any time there is positive news released with regard to a publicly-traded company, we can expect to see gains in the value of the stock associated with that company. Negative news will lead to negative movement. Naturally, following a negative earnings report, we’re seeing strong losses on MSFT at the moment. Currently (10:08), the stock is trading at $51.24 per share after a loss of $4.54 per share or 8.14% thus far today.

What We Can Expect To See Moving Forward

Moving forward, I have a relatively mixed opinion of what we can expect to see from MSFT. In the short run, I’m expecting to see further declines as fear among investors associated with the poor earnings report is likely to continue driving the price of the stock downward. However, in the long run, I have an incredibly bullish opinion of what we can expect to see from MSFT. The reality is that the company is slowly making a transition to focus further on the cloud and software. This is going to pay off in the long run as the industry known as the internet of things continues to grow!

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What Do You Think?

Where do you think MSFT is headed moving forward and why? Let us know your opinion in the comments below!

[Image Courtesy of Wikimedia]

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