UNDERSTANDING MICROSOFT (MSFT) STOCK PERFORMANCE

 MICROSOFT CORPORATION (MSFT) is a leading global technology giant that develops, licenses, and supports a wide range of software products, services, and devices. Its operations are structured into three main segments: Productivity & Business Processes, Intelligent Cloud, and More Personal Computing. This report aims to provide a comprehensive analysis of MSFT's stock performance from January 4, 2010, to June 20, 2025, integrating both fundamental and technical analysis to offer a holistic view of its performance and future prospects. I. Historical Price Behavior Analysis (Long Term (2010-2025))

This segment examines the evolution of MSFT's stock price over 15 years, providing a solid basis for understanding its trajectory.

                                                     

The notable difference between the mean and median ($143.95 vs. $74.69) confirms a positive skew to the right in the price distribution, with a skewness of 0.922896. This indicates that the distribution has a longer "tail" toward higher values; that is, the price has spent more time at low levels in the past but has experienced significant increases that raise the mean.

A negative kurtosis (platykurtic) suggests that the price distribution is "flattened" and has shorter tails than would be expected in a normal distribution. This implies a greater dispersion of the data around the mean, which translates into a greater probability of observing higher values. Extremes (both very low and very high) occur less frequently than a normal distribution would predict, but with a greater concentration of data on the "shoulders" of the distribution. This is consistent with a stock's behavior that experiences periods of relative stability followed by sharp movements.

                                                    

The vast difference between resistance and support underscores the dynamism and volatility inherent in Microsoft's stock over 15 years. This amplitude reflects the company's ability to grow exponentially, surpassing previous price levels.

In the least-squares regression equation Y=0.1073x+64.809, the slope (0.1073) indicates that, on average, for each unit of time (approximately one business day), Microsoft's stock price has increased by USD 0.1073. This is a measure of the average daily upward trend.

The coefficient of determination R² is an extraordinarily high value (83.76%), meaning that 83.76% of the variation in MSFT's stock price can be explained by elapsed time. This confirms a powerful and consistent long-term upward trend, indicating robust fundamental growth.

When displayed, the probability p refers to the degree of confidence. Such a high degree of confidence suggests that the current stock price is in the 99.47th percentile of its historical distribution. While this reflects the asset's strength, it also incites caution, as prices that deviate significantly from their historical average are often subject to correction or adjustment.

In this segment, we delve into Microsoft's financial health and market position, based on the indicators researched.

The market capitalization of $3.57 trillion defines Microsoft as a mega-cap company, one of the largest in the world. This implies a high degree of stability, consolidated leadership in the technology industry, and lower volatility compared to smaller companies. Its size gives it a significant competitive advantage and the ability to invest massively in R&D.

Total revenue (last fiscal year) of $270 billion and net profit (last fiscal year) of $97 billion are gigantic figures and confirm Microsoft's massive scale and high profitability. The ability to turn $270 billion into $97 billion in net profit is a sign of efficient management and a business model with strong margins.

An EPS of $13 is a solid indicator of the profitability the company generates per outstanding share, a key factor for investors.

A 69.1% gross margin is extremely high, suggesting superior pricing power, efficient production costs, or a business structure with low direct costs. This is a clear sign of a highly profitable company at the operating level, common in the software industry.

                                                          

An ROA of 18.5% is excellent, indicating that Microsoft is very effective in utilizing its assets to generate profits.

An ROE of 33.6% is very strong, demonstrating that the company is generating significant value for its shareholders for every dollar of invested capital.

Although the study identifies a slight downward trend over the past five years in management effectiveness ratios, current values ​​remain exceptional. This slight decline could be the result of capital reinvestment in high-growth areas (such as AI) that have not yet realized their full return, or simply a consequence of a constantly growing capital and asset base.

The dividend yield of 0.7% is relatively low, positioning MSFT not as a prime stock for investors focused on dividend income, but rather for those seeking long-term capital appreciation. However, the fact that it offers a dividend, and that it is growing, is a positive factor.

The study mentions that the 5-year average P/E is 59.02, which would make the current P/E of 36.89 lower than its historical average, suggesting that it may be less expensive than before relative to its own recent history. However, it also mentions that the industry average is 41x.

While 36.9x is high in absolute terms, indicating that investors are willing to pay nearly 37 times annual earnings for each share, if it is below its historical average and/or slightly below the industry average (41x), it could be considered reasonably valued for a company of its quality and growth prospects. A high P/E reflects the market's high expectations for future growth for Microsoft.

A P/E ratio of 11.1x is significantly high. This indicates that the market values ​​Microsoft at more than 11 times its book value. This can be justified by the company's valuable intangible assets (brands, patents, software, ecosystem, etc.) that are not fully reflected in its book value, or by the strong future growth prospects that justify this premium.

An EBITDA of $149.2 billion is robust and reinforces the company's strong cash generation capacity, a key measure of operating performance.

Similar to the P/E ratio, an EV/EBITDA of 24.1x is relatively high, suggesting that the market values ​​the company with high expectations for future growth and operational strength. It is a useful metric for comparing companies with different capital structures.

The price-to-sales (P/S) ratio is approximately 13.1x to 13.3x (based on external analysis). This ratio is also high, which is common for software companies with high gross margins. Investors are willing to pay a high multiple of sales due to Microsoft's ability to turn those sales into substantial profits.

A beta of 1.03 means that Microsoft's stock tends to move slightly more than the broader market. If the market rises 1%, MSFT could rise 1.03%. If the market falls 1%, MSFT could fall 1.03%. This indicates that the stock has volatility similar to or marginally higher than the market, which is expected for a mega-cap stock with a strong growth component.

The company enjoys excellent financial health, giving it flexibility to invest, acquire, and return capital to shareholders.

Microsoft shows impressive and consistent growth in both sales and profits, which is the main driver behind its high valuation.

The medium-term period runs from February 8, 2021, to June 20, 2025. During this period, the price rose from USD 242.47 to USD 480.24, representing a return of 98.06% over the past three years.

                                                       

The mean is USD 332.09, the median is USD 321.83, and the mode is USD 244.49. The difference between these statistics causes the distribution to appear skewed by 0.2604 (right skew).

The mean being greater than the median and the mode indicates that, although the price has increased, there is still a concentration of data at the lower values ​​within this period. The positive skew persists, although it is smaller than in the long run, suggesting a more even distribution of prices in this recent period of growth.

The platykurtic kurtosis, similar to the long run, indicates a greater dispersion of the data around the mean in this period.

The reduction in the width between support and resistance indicates that growth has been more "compressed" and less volatile in this recent period, which could be due to a more mature market or greater investor confidence that cushions declines.

The Least Squares Regression Equation Y=0.1865x+229.8 exhibits a slope of 0.1865. The slope has increased significantly relative to The long-term trend indicates a faster daily growth rate in this recent period.

Similar to the long-term trend, such a high cumulative probability (98.15%) and a confidence limit that incites caution suggest that the stock price is at the top of its probabilistic range for this period. This reinforces the idea of ​​a possible correction or adjustment in the short to medium term.

At this point in the analysis, the focus is on current technical signals to assess momentum and potential reversals. Most indicators and oscillators are generating buy signals, indicating widespread bullish momentum.

                                                        

The Relative Strength Index (RSI) above 50 suggests price strength. It is not at extremely overbought levels (>70), leaving room for further growth.

The MACD above the signal line confirms strong bullish momentum.

The Average Directional Index (ADX) is above 20-25. It indicates the presence of a defined and robust trend, confirming the uptrend.

A StochRSI above 80 provides a key short-term overbought signal. Although the overall trend is bullish, this suggests the asset could be extended and vulnerable to a potential reversal or consolidation in the short term. This is a signal to monitor with caution.

The average true range (ATR) is low. It indicates lower volatility over the past 14 periods, which could signal a consolidation phase or less erratic movement before the next big move All moving averages (5, 10, 20, 50, 100, 200) in their simple (SMA) and exponential (EMA) variants are generating buy signals. When the current price is above all of its moving averages and these are ordered ascending (MA5 > MA10 > MA20), it is a very strong signal of a robust and consolidated uptrend across multiple time horizons (short, medium, and long term).

The technical outlook for MSFT is mostly bullish, with a strong preponderance of buy signals, especially in the moving averages. This suggests a well-established uptrend. However, the overbought signal from the StochRSI is a crucial reminder that the asset could be somewhat extended in the short term, making a correction or consolidation plausible before the uptrend continues. The sell signal from the Ultimate Oscillator, although in the minority, adds an element of caution. In the short term, the stock's most immediate performance is examined from September 27, 2024, to June 20, 2025. The price rose from USD 428.02 to USD 480.24, representing a return of 12.20% over the past six months.

The mean is USD 420.27 (higher than in the long and medium term), and the median is USD 418.79 (higher than in the long and medium term). This difference defines a skewness of -0.023 or left skew.

The mean being slightly higher than the median and a negative skewness very close to zero indicates a more symmetrical distribution over this shorter time period. This could suggest a phase of greater stability or price consolidation after upward movements. Kurtosis The platykurtic (flatter than normal) trend confirms a greater relative dispersion in the data.

The difference between the support and resistance levels results in a range of USD 125.68. The range is much narrower than in the medium and long term, indicating lower volatility and a narrower trading range over the past six months.

Such a high value for the probability p reinforces the need for close monitoring. This cumulative probability and the short-term cycle (50-60 days) suggest that a reversal or price adjustment is highly possible in the short to medium term.

Analysis of the linear regression equations across all timeframes (long, medium, and short term) suggests a possible price correction or decline. This is a key cautionary signal, despite the company's undeniable strength.

Microsoft is a colossal, mature, and extremely profitable company with an undisputed leadership position in the technology industry. Its fundamentals are enviable, and its dominance in key segments such as cloud (Azure), enterprise software (Office 365), and its aggressive foray into artificial intelligence position it solidly for long-term growth.

MSFT's current valuation, reflected in its P/E, P/B, and EV/EBITDA multiples, is elevated compared to the broader market. This suggests that the market has already factored in a significant portion of its future growth into the current share price. It is not a "cheap" stock because of its multiples.

The exceptional quality of its fundamentals justifies the high valuation, its proven ability to grow consistently, its high profitability margins, its solid financial position and its economic moat (durable competitive advantage.

For future earnings potential to materialize, Microsoft must continue to execute its growth strategy exceptionally, and high market expectations must be met or exceeded.

Given its high valuation and short-term overbought technical signals (StochRSI), the stock is more susceptible to corrections if expectations are not met or if there is a significant adverse change in the competitive or macroeconomic environment.

The observation that current volume is below average (17.526M vs. 22.868M) is relevant. Low volume in a high price environment could indicate less conviction behind the current bullish movement, or a phase of diminished interest, which could precede a consolidation or correction.

Microsoft is undoubtedly a high-quality investment for a long-term horizon, with a proven track record of creating shareholder value. However, for short- and medium-term investors, the combination of elevated valuation, overbought signals in certain technical oscillators, high cumulative probabilities, and the forecast of linear regressions suggests caution and very active monitoring.

Existing investors are advised to consider taking partial profits if they have a shorter investment horizon, or at least maintain a close watch for any signs of reversal. For new investors, it would be prudent to wait for a possible correction or consolidation.

that offers a more favorable entry point, aligned with the principle that even the best companies can be a bad investment if purchased at an excessively high price. Risk management is essential, even for a "blue giant" like Microsoft.

This expanded analysis provides a more complete and critical view, connecting the different data points more coherently and offering recommendations based on the economic and financial interpretation of them.