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Microsoft (MSFT), one of just two Magnificent Seven stocks to move higher amid this week’s stock market drubbing, leads this weekend’s watch list of five stocks near buy points. Like MSFT stock, the other four all are among the 30 stocks that make up the Dow Jones Industrial Average. IBM (IBM), Walmart (WMT), UnitedHealth Group (UNH), and Amgen (AMGN) round out the list.
MSFT is part of the flagship IBD 50 list of leading growth stocks. Both MSFT and UNH stock are part of the IBD Long-Term Leaders list, reflecting reliable earnings growth that makes them good candidates for buying on a pullback. Yet in the current environment, investors should be mostly on the sidelines.
The S&P 500 and Nasdaq both entered a traditional correction this week, falling 10.3% and 11.9% from their 52-week closing highs in July. The Dow Jones has held up slightly better, helped by this weekend’s watch-list stocks, but is off 9% from its recent Aug. 1 high. All are at multi-month lows. The surge in the 10-year Treasury yield, a hawkish Federal Reserve, and an increasingly dangerous geopolitical backdrop make this a dicey time to try and pick a bottom for stocks, as Friday’s market reversal from an early gain demonstrated. Several days of strong performance and, ideally, a follow-through day will be needed before there’s a green light. Be sure to read IBD’s daily afternoon The Big Picture column to stay in sync with the market’s underlying trend and what it means for your trading decisions.
Microsoft’s fiscal Q1 earnings report on Tuesday fueled a 3.1% rise in Wednesday’s stock market action, though MSFT stock would give much of that back by the end of the week. Both earnings and sales growth accelerated for a third straight quarter, with EPS up 27% to $2.99 and revenue rising 13% to $56.5 billion — $2 billion ahead of estimates. Highlights included 29% growth for Azure, topping that of the other cloud titans, Google (GOOGL) and Amazon (AMZN). Microsoft’s Copilot AI tool topped 1 million paid users. The Dow tech titan guided up on fiscal Q2 revenue, predicting yet another quarter of faster growth, to 16%. Piper Sandler analyst Brent Bracelin hiked his price target for MSFT stock to 425 from 400, keeping an overweight rating. The firm noted Microsoft’s profit margin expansion even as it invests heavily in AI, which bodes well for the outlook. MSFT stock finished the week up 1% at 329.81. MSFT stock has an official buy point of 366.78 from a 15-week consolidation. A move past Wednesday’s high of 346.20 would offer an early entry opportunity. That could develop into a handle in the coming days. Microsoft’s relative strength line, the blue line in IBD charts that tracks its progress vs. the S&P 500, closed the week at a record high, confirming its leadership.
IBM topped Q3 estimates, as earnings rose 22% to $2.20 and sales grew 5% to $14.8 billion. IBM stock rose 3.9% to 142.52 for the week, breaking above the 50-day line on Thursday before slipping back on Friday. IBM has a 151.93 flat-base buy point. Walmart was featured as IBD Stock Of The Day on Thursday. Tigress Financial hiked its WMT price target to 196 from 182, keeping a buy rating. Walmart’s fiscal Q3 earnings are due Nov. 16. WMT stock rose 1.5% to 161.17 last week, as its RS line hit a 52-week high. UnitedHealth has turned the page after a June earnings warning related to Medicare Advantage customers undergoing more elective surgeries. The Q3 earnings report continued to assuage concerns about medical cost trends. UNH stock dipped 0.45% to 524.66 for the week. Since hitting an intraday peak the day after its Q3 earnings beat, UNH stock has formed a handle on the end of a long consolidation, with a 546.78 buy point. Amgen got a couple of price target hikes over the past week, though it didn’t help, as AMGN stock slid 6.2% to 261.57. The 268.24 buy point is still valid, but Amgen stock could use some repair time. The biotech giant reports earnings on Wednesday.
For more information and insights on these stocks, stay tuned to IBD’s daily afternoon The Big Picture column.
