Tech giant Microsoft (NASDAQ:MSFT) reports its third-quarter earnings on Tuesday, after the markets
close. It has been a tough start to 2022 for it and other tech stocks, as shares of Microsoft have fallen
more than 18% year to date. Currently trading at 29 times its trailing earnings, it's still at a higher
premium than where the stock was trading before the pandemic. At just over $274 to finish last week, it
would need more than a 13% decline to reach its 52-week low of $238.07.
Given some of the sharp declines that there have been post-earnings of late, the most notable being
Netflix (NASDAQ:NFLX) and its mammoth 35% decline earlier this month, it's certainly possibly for
Microsoft to hit a new low if it underperforms; growth investors have been punishing underperforming
stocks of late, regardless of how popular they have been in the past.
But is Microsoft a safe bet heading into earnings? In each of the past 10 quarters, the company has beat
estimates for both earnings and revenue. However, the stock typically doesn't make a big move on
earnings day. The last time it reported earnings in January, its shares rose by less than 3% despite
delivering an earnings surprise of more than 8%.
Microsoft is one of the safer tech stocks investors can own right now but given the selloff this year, it
wouldn't be surprising to see its shares fall after earnings, regardless of it beats expectations or not.
Plus, its high valuation could make the stock more vulnerable than normal.
If you want to buy shares of Microsoft, you may be better off waiting until after the earnings report, as it
seems more likely that the stock will slide afterwards rather than rise significantly.
