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VIDEOTicker Shock: Five Reasons Why Bulls Should Run on Microsoft
Friday's top stories and stocks with potential to move.
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Asian stocks inched higher overnight. The Hang Seng and the Nikkei were up 0.83% and 1.55%, respectively. European stocks were in the green earlier this mornings as well. And here in the US, we're currently trading lower.
Here’s what I’m focused on this fine Friday morning (besides the upcoming weekend):
Microsoft (MSFT):
Good ol’ Mister Softee put up $0.34 in its fourth quarter. However, it was quick to point out in the release that a revenue deferral cost it $0.02. It also outlined how severance charges, impairments to investments, and legal charges cost it an additional $0.02. But it's not so much the bottom line that folks are going to be paying attention to as the top-line result. It missed the expectation by a pretty good amount. Sales came in at almost $13.1 billion, whereas the Street had been looking for $14.38 billion.
My thoughts:
1. I’m guessing when Mr. Ballmer wakes up this morning he’ll probably take a couple of Alka-Seltzers. All kidding aside, it certainly wasn’t a stellar quarter, but Microsoft will be back. We're talking about a company that still has a great name and good management, and ended the quarter with more than $31 billion in cash/equivalents/short-term investments. That’s probably a little more than some small countries.
2. Because the sentiment is so lousy on these guys right now, it makes me even more of a bull.
3. With all that said, I’m not expecting too much in the way of catalysts in the very-near term. Cost savings is great, but I want to see a pop in the top line.
4. I do see weakness as an opportunity to nibble a smidge.
5. If you gave me a choice of playing in this or the Google (GOOG) playground for the next 5 years, I’d choose to play here. Although Schmidt does seem like he’d be a bit more fun than Ballmer.
Amazon (AMZN):
At first read, its second-quarter results were good -- but that’s the problem. In the period ended in June, Bezos’s baby put up $0.32 a share, which was a penny north of estimates. The problem is, the Street was looking for a little more oomph. Meanwhile, the top line seemed light. And while I’m at it, the third-quarter outlook wasn’t totally inspiring, either. In the release, it indicated it’s looking for $4.75 to $5.25 billion in sales. The Street is at a smidge over $4.9 billion.
Some thoughts:
1. I’m still excited about the prospects for the Kindle.
2. While I’m not overly thrilled with the quarter, betting against Amazon would be a mistake.
3. I like the fact that it's still trading in the upper-end of its 52-week range. If it can make it through today and get some wind in its sails towards eventually making a new high, it could punch through $100. However, if the momentum guys seek greener pastures, I see some risk. On a price-to-expected-earnings basis, the stock isn't cheap. It’s expected to earn just $1.64 a share this year.
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