Reader Mailbag: MSFT miss Penny Wise $2 Foolish

Our reader Jack asks us if Microsoft trading down almost $2 after missing estimates by just a penny is an overreaction?

We don’t believe it’s the penny that has Wall Street upset. Management guided expectations down by about 3 cents for its next quarter. Microsoft used to be the master of managing expectations and beating the number. It seems that mastery has ended. In our view, that’s what has the market in a foul mood regarding MSFT. Their earnings have become less predictable meaning the risk of owning MSFT has gone up.

So to answer Jack’s question, the answer is no.pic3

Speaking of earnings, our subscribers have had a good run of it of late with our Trading Earnings picks. Every week we highlight a select group of companies slated to release their numbers in the days ahead that we feel will pop or drop with their quarterly checkup.

This week we advised our premium content readers to short International Game Technologies (IGT). We thought they would miss expectations and revise down, they did and the stock promptly fell 10% in a day.

As we mentioned in a previous post, we wrote IBM would top estimates and revise up, they did and Big Blue is up nearly $2 while the market is down. We expect IBM to set a new 52 week high in the days ahead.

To catch next week’s Trading Earnings Picks subscribe now.

Don’t forget to email us your questions for next week’s Reader Mailbag.

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