The Daily Breakdown takes a closer look at Microsoft before the firm reports earnings tonight. It will do so alongside Meta, as well.
Wednesday’s TLDR
GDP and inflation in focus
META, MSFT report earnings
SBUX falls on results
What’s Happening?
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Yesterday’s job openings report (JOLTS) missed expectations and was the lowest figure since September — which, in itself, was an outlier report of the past few years. Further, consumer confidence fell for a fifth straight month and hit its lowest point in almost five years.
While corporate conference calls are not yet reflecting panic or a material slowdown, it’s clear that management teams are still hitting pause. For instance, an action that could be reflected in the declining number of job openings they have.
Today’s initial Q1 GDP report should be interesting, but it will not capture the full impact of tariffs given that many policies did not go into effect until April. Also keep an eye on the PCE inflation report at 10 a.m. ET. Remember, this is the Fed’s preferred inflation gauge.
For many investors though, it’s earnings that matter more. That’s as Meta and Microsoft report tonight. They’ll be joined by other companies too, like Robinhood and Qualcomm.
Investors are obviously hoping for strong results from the two Magnificent 7 holdings. Not only could that help give tech a boost — which is the second-worst performing sector so far this year (and the largest weighting in the S&P 500) — but positive commentary could boost other areas of the market, like AI and chipmakers.
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The Setup — Microsoft
Analysts expect Microsoft to report earnings of $3.21 a share on revenue of $68.5 billion. In-line results would result in year over year growth of 9.4% and 10.7%, respectively.
Investors will be looking for clues on the shape of Microsoft’s business, including its cloud division and spending outlook for the year (its CapEx outlook). Strong results and confidence from investors may result in a breakout over current resistance, which comes into play around $395.
If shares are able to clear this level, it could kickstart a potential move over $400 and possibly push MSFT stock to test its 200-day moving average. Based on the prior closing price, that’s about 5.5% above current levels.
However, if the reaction is bearish, then MSFT could pull back from current resistance levels, potentially breaking below the 50-day moving average near $386. On April 21st, MSFT made a higher low from its April 7th pullback, and technical investors would like to see this trend of “higher lows” continue. If shares decline after earnings, the levels from April 21st could become a key short-term focus.
Options
For options traders, calls or call spreads are one way for investors to speculate on more upside, while puts or put spreads allow them to speculate on further downside or allow bulls to hedge their long positions.
Using options around big events — like earnings — tend to be more expensive. However, one advantage is that the total risk of the trade is tied to the premium paid when buying options or option spreads.
For those looking to learn more about options, consider visiting the eToro Academy.
What Wall Street is Watching
SBUX – Shares of Starbucks are falling in pre-market trading, down almost 9%. Earnings of 44 cents a share missed estimates of 49 cents a share, while revenue of $8.76 billion slightly missed estimates of $8.82 billion. Check out the chart for SBUX.
SNAP – Snap stock is tumbling lower in pre-market trading, down almost 15% despite the company beating on earnings and revenue expectations. However, management’s decision to suspend its guidance is causing some reservations, even though that action has not been uncommon this quarter.
Disclaimer:
Please note that due to market volatility, some of the prices may have already been reached and scenarios played out.
