7/29 Daily Plan: MSFT DCF Commentary Ahead of Earnings

MSFT DCF Commentary

Ahead of earnings this week, I’m going to provide an update/commentary on estimates for Microsoft (MSFT) as it is among one of the most important names within the Nasdaq, the S&P 500, and the Dow.

I keep my DCF Bear/Base/Bull cases intact for MSFT ahead of earnings but there are a few caveats:

• My DCF base case on Microsoft as Members know is 415-420. Last week’s swing low with the tech selloff was exactly in this range before bouncing back to 427-429 today.

  

• At 415-420/share, our DCF Model was able to identify a reactive bounce region for MSFT as it approached a 45% EBITDA Margin // 21X EV/EBITDA input assumption (which represents 415-420 based on my modeling).

• However - first tests of a level are the strongest. Any subsequent test of this level again will result in volatility/uncertainty in the name again. This level may hold on the second test, but I will be less confident.

Therefore, my preliminary opinion is that MSFT must hold (or quickly reclaim if lost) 415-420/share post earnings for us to have any evidence that QQQ ETF is on the path of recovery rather than on the path of a further decline.

Below I’ll share additional context and info about how the Street is thinking about MSFT ahead of the earnings print based on industry surveys.

I will share some Industry Surveys & Charts conducted by JPM on Microsoft Partners.

Below the charts I’ll share some updated commentary and how this may impact the near-term // long-term picture on MSFT and its implications on Nasdaq and S&P 500.