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Six Reasons Microsoft Will Keep the Wind at Its Back


And why it's a longer-term play.

Microsoft's (MSFT) share price has mounted a pretty hefty comeback from its annual lows, and I'm here to tell you that I think the wind it's had at its back is going to continue.

Here are some of the reasons why Ballmer and crew warrant some love:

From a big-picture perspective, even though Mister Softee has arguably lost some of its so-called panache, the fact is, it's going to have a tremendous impact on the way we compute and communicate as far out as I can see. It's got a big name, a smart management crew, a big float, and it trades some big volumes, which is likely to keep it atop the favorites list at many an institution.

2. Digging a bit deeper, I'd like to see the company come out with one or two blowout quarters. But to its credit, it's either met or beat expectations in the past three of four quarters -- nothing to sneeze at.

3. With respect to the upcoming third-quarter announcement due out on the October 23 before the bell, the Washington-based behemoth is expected to put up $0.32. My gut feel is that it will at least meet -- and probably beat -- that expectation. And I'm hoping to see a solid performance on the top line (note that analysts are looking for $12.4 billion). Additionally, I'm hoping the company serves up a decent outlook for the rest of the year, and very importantly, sheds some more light on what the coming 12 months might hold for this space.

4. The Street is expecting the company to grow its EPS by a little more than 14% from this year to next. I'm hoping for some sense that this will actually happen.

5. I don't think around 15.2 times this year's estimate is too much to pay for Microsoft. The shares have plenty of room to run and frankly, they should be trading in the $30s right now.

6. I suspect the shares will remain near their highs, but may punch through ahead of the announcement.

All that said, two things: First, I'd definitely like to see insiders belly up in the open market. Second, because the shares have performed pretty well, I wouldn't be surprised to see a bit of a pullback at some point. For this reason, I'm looking at this as more of longer-term play as opposed to a trade on the announcement.

Hey -- have a great day!

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No positions in stocks mentioned.

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