Saturday, July 20, 2013

Update on Google (GOOG) and Microsoft (MSFT)...

This week some earnings of note came out for some of the big tech names. Let's take a look at the fundamental and technical pictures for both. Let's begin with Google (GOOG), earnings were released on Thursday after the closing bell.

Siting source: Barron's

"Shares of Google (GOOG) are down $12.86, or 1.4%, at $897.86, after the company last night missed Q2 revenue and earnings expectations, with a quarter-over-quarter decline in ad dollars from partner Web sites, and a 6% year-over-year decline in cost per click, the price Google charges advertisers, on average.

The stock hasn’t received any ratings changes from the main brokers today, and although estimates are going down, many bulls are maintaining or even raising their price targets, advising investors to look past the disappointment."

So it appears Wall Street remains bullish on this name, and for good reasons, it is still growing. Even from a valuation stand point after this amazing run up that nears $1000 share price point, the stock still remains only about 1% above it's 5 year price to earnings average and almost identical to it's 5 year price to book average.

Now from a technical perspective I have shared the above two charts. The top chart is a weekly chart going all the way back it's IPO in 2004. On it I have annotated the fact that above $900/share we have now matched the size of the 2004-2007 bull market in terms of points. Now this can be taken as a caution point, but the way I see it there is no reason to be bearish the name until/unless it breaks below that long term trend line currently coming in at just above $705.

For the short term, the bottom of the two charts shows a daily chart that has been annotated to depict the recent price action. Since we held the high of the last trading range box after matching the measured move, a maximum upside target for the short term would come in around $980-$1000. Support stands around the midpoint of this recent trading range, which is approximately $845.

The other big tech name with earnings this week was Microsoft (MSFT). Again siting source Barron's

"Shares of Microsoft (MSFT) are down $2.16, or 6%, at $33.27, after the company this afternoon reported fiscal Q4 revenue and earnings per share well below analysts’ estimates, citing the impact of the decline in PC sales, but noting strength in corporate and cloud computing software."

Also adding in conclusion:

"On a phone call following the report, Microsoft’s head of investors relations, Chris Suh, was kind enough to step through the results briefly to underscore certain items. He pointed out that on the plus side, “unearned revenue” was at an all-time-high in the quarter, at $22.4 billion. He confessed the Windows and PC side of the business was a “mixed bag,” reflecting what the company believes was single-digit growth in business PC sales, but declines of more than 20% in consumer PC sales. He said the company still hoped that its update to Windows 8, the dot-one release, will lift PC sales. But he also said Microsoft recognized it needed to do a better job in tablet computers."

By the close of Friday's trading session MSFT shares ended down over 11%, coming in as one of the single worst day's on record for Microsoft. From a technical perspective a dramatic move on high volume has to be respected. This is probably not a name I would be "knife catching" anytime soon. However this drop does come after a very nice run up in it's share price, right into strong resistance.

The top chart shows that strong resistance coming in around $37 and change which is both the 2007 highs and the midpoint of the 2000 all time high to 2009 lows. For the short term the bottom of the two charts shows a couple potential support zones going forward.