Microsoft Stock Falls Into Oversold Territory: Time to Buy?

Big tech stocks have been falling under pressure in recent weeks. And one way to measure that pressure is with the Relative Strength Index (RSI), which is a momentum indicator. When the RSI falls below 30, that tells investors there has been a lot of selling of late, and a stock is then considered oversold -- and it may be a potential buying opportunity. Last week, Microsoft (NASDAQ:MSFT)’s stock breached that threshold.

In the past month, shares of Microsoft have fallen by around 11%. And last week, its RSI dipped just below 30 – the first time it has done so within the past year. It’s a rarity for Microsoft’s stock to be oversold, especially given the excitement around artificial intelligence and the role the company plays in its future.

Microsoft recently reported earnings and while revenue was strong and up 15% year over year in the most recent quarter, investors were disappointed with a slower-than-expected growth rate in its cloud business, Azure. It rose by 29% during the quarter while analysts were expecting a growth rate of 31%.

According to a consensus analyst price target of more than $487, there could be a 20% upside for investors who buy the stock right now. And in the long run, there could be even more gains ahead for investors as the business expands deeper into artificial intelligence.

Trading at 31 times its estimated future earnings, Microsoft is a bit of a cheaper buy than it was a few weeks ago but investors are still paying a premium for the business. If, however, you’re willing to buy and hold for the long haul, it can still make for an excellent buy right now.