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Microsoft: On Sale? Or More Pain Ahead?

September 22, 2022

Editor’s note: Any and all references to time frames longer than one trading day are for purposes of market context only, and not recommendations of any holding time frame. Daily rebalancing ETFs are not meant to be held unmonitored for long periods. If you don't have the resources, time or inclination to constantly monitor and manage your positions, leveraged and inverse ETFs are not for you.

Microsoft Corporation (Ticker: MSFT) led the charge within the tech sector’s performance domination throughout the 2010s.  The stock appreciated roughly 2,993% from its March 2009 low of $11.23 to the current all-time high of $347.40 in November 2021.  But MSFT’s performance hasn’t been as strong year-to-date, as it’s down nearly 30% from the all-time high.

Are the Bulls Still in Charge?

From a fundamental standpoint, MSFT is grappling with slowing revenue growth and operating margins that are flat lining.  The stock’s year-to-date correction has brought valuations back down to earth, as MSFT’s Price/Earnings (P/E) ratio is now sitting around 25, which some could argue is a bargain compared to the recent past.  It’s also important for traders to monitor the situation surrounding MSFT’s deal to acquire Activision (Ticker: ATVI), as it’s increasingly under regulatory scrutiny across the world.  

In terms of key events, MSFT’s Q3 earnings report is set for October 25.  Analysts are looking for $2.31 in terms of Earnings Per Share (EPS).  An earnings beat may be what’s needed to shift momentum back in favor of the Bulls.  For traders that think MSFT can still sail through these issues, and are keen to buy the dip in this market-moving stock, Direxion’s Daily MSFT Bull 1.5X Shares (Ticker: MSFU) seeks daily investment results, before fees and expenses, of 150% of the performance of the common shares of Microsoft Corporation.   

Below is a daily chart of MSFT as of September 15, 2022.

Source: TradingView.com as of September 15, 2022.

Candlestick charts display the high, low (stick), open, and closing prices (body) of a security for a specific period.

The performance data quoted represents past performance. Past performance does not guarantee future results. The Fund does not invest directly in MSFT.  It seek daily goals and should not be expected to track the underlying stock’s performance over periods longer than one day. The Funds will lose money if the underlying stock’s performance is flat, and it is possible that the Bull Fund will lose money even if the underlying stock’s performance increases, and the Bear Fund will lose money even if the underlying stock’s performance decreases, over a period longer than a single day.  

The Trend is Your Friend, Until it Ends

The tech sector overall has struggled in the past year due to a shifting macroeconomic environment.  Rising input costs and inflation levels at 40-year highs have become a massive headwind for growth and tech sectors alike. 

It also seems that many insiders at MSFT are keenly aware of the challenges the company faces, and are incrementally cashing out.  There have been several large insider sales by key executives at MSFT in recent months, which could be viewed as a lack-of-confidence from leadership in the stock’s near-term trajectory. Should those insider sales accelerate, Bears have an alternative.  For traders looking to capitalize on bearish catalysts in MSFT, Direxion offers a Daily MSFT Bear 1X Shares (Ticker: MSFD), which seeks daily investment results, before fees and expenses, of 100% of the inverse (or opposite) of the performance of the common shares of Microsoft Corporation.  

Whether you’re a bull or a bear, Direxion is with you. Our Single Stock Daily Leveraged & Inverse ETFs are powerful tools built to help you:

  • Magnify your short-term perspective on single stocks, with daily 1.5X leverage, and daily 1X inverse exposure;
  • Go where there’s potential for opportunity, with bull and bear funds for both sides of the trade; and
  • Stay agile – with liquidity to trade through rapidly changing markets.

Other Single Stock Leveraged Equity Plays

Direxion offers other inverse and leveraged funds for other market-moving equities as well.  These funds include Tesla Inc. (Ticker: TSLA), Apple Inc. (Ticker: AAPL), Alphabet Inc. (Ticker: GOOGL), and Amazon.com, Inc. (Ticker: AMZN).

Investing in the funds involves a high degree of risk. Unlike traditional ETFs, or even other leveraged and/or inverse ETFs, these leveraged and/or inverse single-stock ETFs track the price of a single stock rather than an index, eliminating the benefits of diversification. Single Stock Daily Leveraged & Inverse ETFs pursue daily leveraged investment objectives which means they are riskier than alternatives which do not use leverage. They seek daily goals and should not be expected to track the underlying individual security over periods longer than one day. They are not suitable for all investors and should be utilized only by investors who understand leverage risk and who actively manage their investments.

An investor should carefully consider a Fund’s investment objective, risks, charges, and expenses before investing. A Fund’s prospectus and summary prospectus contain this and other information about the Direxion Shares. To obtain a Fund’s prospectus and summary prospectus call 866-476-7523 or visit our website at www.direxion.com. A Fund’s prospectus and summary prospectus should be read carefully before investing.

Investing in the funds involves a high degree of risk. Unlike traditional ETFs, or even other leveraged and/or inverse ETFs, these leveraged and/or inverse single-stock ETFs track the price of a single stock rather than an index, eliminating the benefits of diversification. Leveraged and inverse ETFs pursue daily leveraged investment objectives, which means they are riskier than alternatives which do not use leverage. They seek daily goals and should not be expected to track the underlying stock’s performance over periods longer than one day. They are not suitable for all investors and should be utilized only by investors who understand leverage risk and who actively manage their investments. The Funds will lose money if the underlying stock’s performance is flat, and it is possible that the Bull Fund will lose money even if the underlying stock's performance increases, and the Bear Fund will lose money even if the underlying stock's performance decreases, over a period longer than a single day.

MSFU/MSFD Specific Risks:  Technology Sector Risk – The market prices of technology-related securities tend to exhibit a greater degree of market risk and sharp price fluctuations than other types of securities. These securities may fall in and out of favor with investors rapidly, which may cause sudden selling and dramatically lower market prices. Technology securities may be affected by intense competition, obsolescence of existing technology, general economic conditions and government regulation and may have limited product lines, markets, financial resources or personnel.

Microsoft Corporation Investing Risk – Microsoft Corporation faces risks associated with competition in the technology sector and among platform-based ecosystems, including its cloud-based services; the evolution of its business, including the development of its new products and acquisitions, joint ventures and strategic alliances; cybersecurity, data privacy and platform abuses; operations, including excessive outages, data losses or disruptions of online services; quality or supply problems; legal, regulatory and litigation risks; and the ability to attract and retain talented employees.

Distributor: Foreside Fund Services, LLC.