Shares of Microsoft Corporation MSFT fell 1.17% on Jan 2 to close the day’s session at $62.14. The decline in shares can be attributed to rumors that Samsung’s upcoming Android-based handset, Galaxy S8 will be able to connect to a monitor, mouse and keyboard to create an “extended workspace” just like Microsoft’s Continuum.
MICROSOFT CORP Price and Consensus
The Continuum technology is used by frequent travelers who stay at hotels. They can make use of their Windows 10-based handset, keyboard, a mouse and an HDMI cable to connect to the screen available within the hotel room. This eliminates the need to carry a laptop. Intensifying competition in the space from the likes of Samsung is what makes investors concerned.
Moreover, app compatibility is another issue that Microsoft needs to address. While Android-based handset users have a plethora of app choices from Alphabet’s GOOGL Google Play, Windows 10-based handsets have a limited number of app choices.
In this regard we note that, in late 2017, Microsoft intends to bridge the gap with the reintroduction of universal Windows apps. Additionally, the company is also contemplating using ARM chips within handsets to run the full Windows 10.
Although shares of Microsoft are on a decline after the stock touched its all-time high of $64.10 on Dec 22, 2016, the stock has largely moved up over the last 12 months. While the stock gave a return of 13.4% over the last one year, the broader Zacks Computer Software industry has returned only 11.5%.
The outperformance of the stock in the past year could be primarily attributed to Microsoft’s continuing enterprise strength, benefits from the Office 365 subscription model, strong growth prospects of its cloud platform Azure and the introduction of promising new products. However, execution, foreign exchange risks and a competitive landscape remain concerns for the company going forward.
Zacks Rank and Key Picks
At present, Microsoft carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology space are Exa Corp. EXA and Imperva, Inc. IMPV each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Notably, the consensus estimate for Exa Corp.’s current year has narrowed down to a loss of 17 cents from a loss of 19 cents over the last seven days.
Similarly, the consensus estimate for Imperva’s current year has narrowed down to a loss of $2.23 from a loss of $2.77 over the last 30 days.
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