On the basis of impressive fiscal 2017 third-quarter results reported by Microsoft Corp (NASDAQ: MSFT), on May 9th, we had stated our interest to purchase a call option valid for a period of one week. The stock of the Azure cloud platform provider, which was trading at about $68 at the time of presenting our article, increased to about $70 in a week’s time. Correspondingly, our call option expired in the money. Now, on the basis of Morgan Stanley’s report and cooperation with Accenture in a blockchain-based digital ID network, we anticipate the stock, which closed at $70.53 yesterday, to rise further.
A report from Keith Weiss, an analyst at investment research firm Morgan Stanley, states that Microsoft would beat analysts’ estimates next year due to an increase in cloud computing demand. Weiss pointed out that Azure, the data center, and Office 365 would drive the growth in Microsoft. Furthermore, Azure would be able to thrive and ride on the latest trends in technology. Weiss expects the demand for Azure would result in FY18 earnings of $3.85 per share, versus analysts’ consensus of $3.32 per share. Weiss also gave an “Overweight” rating for Microsoft, while raising the target price to $80, from $72 given earlier.
In another report, Pacific Crest Securities stated that Microsoft may push Amazon to second place in terms of revenue from cloud computing in 2017. Echoing a similar view, Brent Bracelin, an analyst at the Street, predicted that cloud computing initiatives would reach $239 billion in five years and Microsoft is well poised to gain a lion’s share. Bracelin believes that Microsoft’s product remains unmatched in a platform as a service, software as a service, and infrastructure as a service.
In another development, Microsoft and Accenture are joining together to develop a digital ID network using blockchain technology. The UN-supported project aims to provide legal identification to nearly 1.1 billion people worldwide, with no official identification documents. The prototype was unveiled last week at the UN headquarters. A digital ID would enable refugees to have access to basic food and health services. The global blockchain market is expected to grow at a compounded annual growth rate of 55.59%. Thus, considering the growth prospects, leadership in cloud computing, and analysts’ upgrade, we expect the stock to appreciate in the days ahead.
The price chart of Microsoft indicates support for the stock at 70.15. The momentum indicator, which is moving above the zero line, reflects the prevailing bullishness in the stock. Furthermore, the stock has broken above its 50-day moving average. Thus, we can expect an appreciation in the share price.
By investing in a call option, we wish to position ourselves to gain from the impending uptrend. We would look for a binary broker who offers a contract that expires in a week. Finally, the entry would be made when Microsoft trades near $70 in the cash market.
Disclaimer: The trading analysis offered here is our opinion. It is not provided as trading advice, merely an indication of our trading plan. We cannot guarantee success and we encourage traders to incorporate a strong money management strategy to limit losses. Please use this article as part of your own research before formulating strategies prior to trading.
