Is Microsoft stock a buy in February? This fresh take on the long-term leader among tech stocks and growth companies pinpoints the fundamentals, technicals and fund ownership factors that are influencing the stock's recent action.
On Thursday, shares in one of the largest companies on the Nasdaq and in the U.S. market edged 0.6% higher to 415.82. But on Friday, Microsoft stock fell harder than the general market. While the S&P 500 sank nearly 0.9% and the Nasdaq 100 slipped 1.1%, Mr. Softy slumped almost 1.5% and made an intraday low of 408.10.
On Monday, Microsoft stock recouped a sliver of Friday's loss, up 0.5% in late-afternoon trade.
Ultimately, a stock price is determined by the laws of supply and demand. Growth investors focused on making money right when a potential leader is poised to make a bullish breakout past a proper buy point should consider looking closely at the stock's chart action across multiple time frames.
Is Microsoft Stock A Buy?
First, the fundamentals. According to IBD Stock Checkup, Microsoft ranks first among stocks in the desktop software group. However, a 63 Composite Rating on a scale of 1 to 99 has dropped 3 points in recent days. It also falls well short of the ideal level of 90 or higher.
The IBD Composite Rating combines metrics in earnings, sales, profit margins, return on equity with measures of the stock's relative strength vs. all companies in IBD's database. On top of these factors, IBD layers in the quantity of buying vs. selling in Microsoft stock plus industry performance.
Microsoft's 88 Earnings Per Share Rating is quite good. It means the business software and cloud computing giant's earnings have grown at a quicker pace than 88% of all stocks in the Investor's Business Daily database of more than 10,000 stocks.
In terms of EPS Rating, Microsoft ranks No. 2 in its industry group behind Adobe.
Going beyond the EPS Rating, Microsoft's profit picture looks solid but not spectacular.
Wall Street consensus forecasts call for earnings in the current fiscal year ending in June to rise 12% to $13.15 a share, a slight downward revision. Still, that's more than quadruple what the Redmond, Wash., firm earned in fiscal 2018 ($3.88). Fiscal 2026 earnings are seen accelerating slightly, up 14% to $14.99 a share.
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Technical Action Today
Looking at a monthly chart of Microsoft stock, the megacap tech is obviously not leading the stock market higher. Since reaching an all-time high of 468.35 in July, shares have treaded water, even as the S&P 500 and Nasdaq continued their course of higher highs and higher lows.
On the positive side, Microsoft stock appears to be getting support at 400, a psychologically important round number for investors.
Let's check out the weekly chart.
It shows a seven-month consolidation pattern in the works. Microsoft stock is only 11% off its peak. But it's also trading below its flatlining 10-week and 40-week moving averages.
A great stock normally trades above these technical levels right before a powerful breakout to new highs — the best time to grab shares for growth investors.
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Microsoft's Relative Strength Measure
Another way to get a handle on the technical action? Consider using IBD's unique Relative Strength Rating.
Compared with all other companies in the IBD database, Microsoft stock currently gets a lowly 43 Relative Strength Rating. This means Microsoft has outperformed only 43% of all stocks over the past 12 months.
MarketSurge, meanwhile, notes an even worse 25 score for the six-month RS Rating. And the three-month rating? It's a horrible 19.
Picking the best growth stocks absolutely involves selecting those that are already outperforming their peers before they stage a new strong run.
When a stock breaks out of a well-formed base, you normally want to see the Relative Strength Rating exceed 80 on a scale of 1 to 99. In some cases, when the base gets extra long (think six months or longer), you can expect the rating to be lower than 80. It's not uncommon for excellent large and megacap stocks to bust out of bases and race to new highs even though their RS ratings are in the 50s or 60s.
Microsoft Stock And Institutional Sponsorship
Finally, fund sponsorship remains favorable and is perhaps the strongest leg in the three-legged stool of analyzing Microsoft in terms of fundamental, technical and institutional ownership criteria.
Mutual funds owning Microsoft stock have dipped in the past two quarters. According to MarketSurge, fund ownership has fallen from what appears to be an all-time peak of 10,616 in the quarter ended June 30, 2024, to 10,547 in Q3 and 10,438 in Q4 of the same year.
Among members of the IBD Mutual Fund Index, MFS Growth Fund (MFEGX) trimmed its stake in Microsoft by nearly 400,000 shares in Q4 last year to 12.67 million.
IBD's Accumulation/Distribution Rating is weak at D+ on a scale of A to E. A grade above C is preferred. This rating analyzes 13 weeks' worth of price-and-volume action. An A or B grade indicates large funds are net buyers of a stock.
Notice, too, that MSFT's 33 Relative Strength Rating is nowhere near leadership levels. According to MarketSurge, the 3-month RS Rating is even worse at 22 on a scale of 1 to 99.
The 22 score means Microsoft stock has outperformed only 22% of all companies in the IBD database over the past three months.
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Final Analysis
Microsoft is off to a soft start in 2025. Trading near 412.22 on Monday, the megacap tech holds a 2.2% loss year to date and is likely to mark a three-month closing low. And, it's also lagging a 3.5% rise by both the Nasdaq 100 and a 3.1% lift for the S&P 500 over the same time frame.
All in all, amid an IBD-style analysis of the three above-mentioned key factors, Microsoft stock is not a buy now.
Please follow Chung on X/Twitter: @saitochung and @IBD_DChung
