On Friday, Microsoft Corporation (NASDAQ:MSFT) shares edged higher 2.5% after announcing plans to raise Microsoft 365 subscription rates for the first time. The company is raising the monthly subscription price for Microsoft 365 Business Basic from $5.00 to $6.00 while the premium version will now cost users $22 per month, up from $20. The company also raised prices across all Microsoft Office 365 E series.
Microsoft said new prices will take effect from 1st March 2022 globally.
These increases will apply globally with local market adjustments for certain regions. There are no changes to pricing for education and consumer products at this time.
Several analysts raised their MSFT price targets after the announcement, citing the price hike as a major catalyst for growth.
Is Microsoft stock a buy in Q3 2021?From a valuation perspective, Microsoft shares seem reasonably valued at the current trailing 12-month P/E ratio of 37.79. Furthermore, the company’s forward P/E ratio of 29.66, indicates room for more upward movement amid solid earnings growth.
Analysts expect Microsoft EPS to grow by 39.70% this year and at an average annual rate of 15.25% over the next five years, making the stock attractive to growth investors. Therefore, although Microsoft shares are up nearly 40% this year, there is room for more gains.
Source – TradingView Technical overview: Microsoft stock price predictions for Q3 2021Technically, Microsoft shares seem to have recently broken out of an ascending channel formation in the intraday chart. As a result, the stock is now trading in overbought conditions of the 14-day RSI. Therefore, a short-term pullback could be on the horizon.
However, following the company’s Office 365 price hike, the stock has a solid catalyst to push the price higher. As such, investors can target extended gains at approximately $314.94 or higher at $327.10. On the other hand, those targeting potential pullbacks can target profits at the support levels at $293.95 and $282.09.
Bottom line: the case for buying Microsoft shares nowIn summary, although Microsoft shares are up nearly 40% this year, its prospective earnings growth presents an attractive proposition to buy.
Furthermore, the panned Office 365 price hike boosts long-term revenue and earnings potential, making the stock attractive to growth investors. As a result, it may not be too late to buy MSFT shares.
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