August 23, 2021, | AtoZ Markets – Microsoft shares closed at a new record high Monday, following the software maker’s decision to raise the price of certain subscriptions for businesses next year.
Shares closed today at $304.65, giving the company a market capitalization of nearly $2.3 billion.
Microsoft shares are up about 37% in 2021, outperforming most of its big tech rivals. However, Alphabet, Google’s parent company, has posted gains of nearly 60% so far this year.
What Do the Analysts Think?
Analysts have not yet rushed to update their estimates. However, analysts said the price change has the potential to boost revenues from a key part of the company. Something that would also happen to earnings.
This is because the costs of providing Office 365 services to customers are already included in Microsoft’s operations.
Meanwhile, “Office 365 commercial subscriptions accounted for about 18% of Microsoft’s revenue in the fiscal year ending June 30,” Goldman Sachs analysts said in a note yesterday.
“We believe the recent announcement underscores the company’s strong competitive positioning and long-term pricing power.”Goldman Sachs team said.
Meanwhile, analysts at Mizuho and UBS raised their price targets for Microsoft shares to $ 350 from $ 325 after Microsoft’s announcement.
What Was Microsoft’s Announcement?
The price of the premium Office 365 E5, increases by 9% per user per month as of March 1, 2022, while the cost of the more affordable Office 365 E1 will increase by 25%.
The impact will not only affect the Office line. The cost of Microsoft 365 E3, which will increase by 13% in price, includes Windows and enterprise mobility and security features.
More revenue from that subscription means more money for the highly profitable Windows business. Along with the per-user portion of the fast-growing Azure cloud business, UBS analysts wrote.
If we look at the daily chart, we can see that the price still has space to grow. However, we should also note that when it picks up momentum on the price chart, it then takes a small break before continuing. This value is almost consistently at the 23.6% retracement if we measure it with Fibonacci.
Following this process, Microsoft’s share price has the $301 zone as an important support to consider. It is very important for Microsoft’s share price, that the next quarterly results are favorable for the company.
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