Microsoft’s stock plunge raises questions about its 2026 outlook
Microsoft's stock has experienced a significant decline in recent weeks. Since early November 2025, shares have fallen below crucial technical levels, including the 20-day moving average. The latest earnings report and shifting trading signals are now the primary factors influencing investor sentiment.
The company's share price has dropped by 11.46% from its 52-week high of around $555. This pullback has pushed the stock below the critical support level of $490, where trading volumes were previously concentrated. Analysts have also noted a substantial narrowing of the Bollinger Bandwidth since September 2025, a pattern often associated with increased market instability.
An earlier analysis on October 11, 2025, had assigned Microsoft a 'buy' rating. However, the current outlook suggests further downward movement, with expectations that the price could stabilize between $440 and $450 in the near term. At $450, the forward price-to-earnings (P/E) ratio would be around 28x, a level some investors find attractive.
Meanwhile, Microsoft's capital expenditure for fiscal year 2026 is projected to reach up to $140 billion. This figure represents roughly 43% of its forward revenue, indicating substantial investment in growth. If the stock stabilizes at $450, the owner's earning yield could reach at least 3.5%, potentially delivering mid-teens annual returns over the long term.
The ongoing correction has brought Microsoft's valuation into sharper focus. A price near $450 would align with a forward P/E of 28x, offering a clearer entry point for investors. The company's heavy capital spending and technical trends will likely remain key factors in determining its stock trajectory.
