Can Earnings Help Microsoft Stock Recover Ground?

Microsoft made headline recently amid plans to acquire Activision Blizzard

Deputy Editor
Jan 25, 2022 at 1:05 PM
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Microsoft Corporation (NASDAQ:MSFT) stock is down 3.2% at $287.08 this afternoon, though still trading well above yesterday's session lows near $275, amid a broader-market pullback. MSFT made headlines recently, after announcing its acquisition of Activision Blizzard (ATVI) for a record-setting $68.7 billion; however, that's translated to very little positive movement for the underlying security, which has shed 14.5% already in 2022. Now facing a close below the 200-day moving average for the first time since March 2020, the shares are in desperate need of a win as earnings loom.

MSFT Chart Jan 25

Specifically, the tech powerhouse is slated to report fiscal second-quarter earnings after the close today -- one of a number of blue-chip components reporting quarterly results this week. Microsoft stock has closed higher the day after the company reported in half of the past eight quarters. On average, the shares have moved 2.6% in the subsequent session over this two-year time frame, regardless of direction. This time around, the options market is pricing in a larger-than-usual 10.4% next-day move for Wednesday's trading.

Even as with MSFT's acquisition news having bullish implications for the video game sector as a whole, options traders remain bearish. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows the software concern with a 10-day put/call volume ratio that ranks in the 92nd percentile of its annual range. In other words, Microsoft stock puts have been picked up at a faster-than-usual clip during the past two weeks, pointing to a pessimistic pre-earnings skew among speculators. 

 

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