“Mentorship Program” Recommendations
- Week Beginning -
Monday, January 27, 2020

by Ian Harvey

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Option Trade – Zynga Inc (NASDAQ: ZNGA) Calls

Friday, January 31, 2020

** OPTION TRADE: Buy ZNGA JUN 192020 7.000 CALL at approximately $0.27.

Place a high pre-determined sell at $1.00. This can be adjusted accordingly.

Introduction.....

I recently recommended a Zynga Inc (NASDAQ: ZNGA) options trade to “Armchair Traders,” but the stock has fallen back a bit.

However, I have now recommended that they double-down on this trade.

Therefore, I believe that this is a good opportunity for Mentorship Members to also profit from a very cheap options trade.

The Previous Information.....from January 17, 2020

Mobile game maker Zynga Inc (NASDAQ: ZNGA) has increased its guidance three times last year. Profit margins have rebounded, and sales are growing at their fastest pace since the game developer went public in 2011. Zynga is “on track to be one of the fastest-growing -- if not the fastest-growing -- gaming company at scale,” Zynga Inc.’s CEO Frank Gibeau said.

Zynga shares have nearly tripled to $6.81 since Gibeau, now 51, took over as chief executive officer. That includes a 56% gain in 2019, eclipsing the S&P 500’s 29% increase.

The stock is still far below its post-IPO high set in 2012, when the exuberance around social media propelled Zynga to almost $16. But shareholders and Wall Street analysts are embracing the company again.

“Investors like a good turnaround story,” said Colin Sebastian, an analyst at Robert W. Baird & Co.

Along the way, Gibeau reinvented what Zynga is about. It now makes only a sliver of its money from Facebook-based games, which gave the company a reputation for delivering endless requests and notifications to social-media users.

Instead, Zynga focuses on stand-alone titles that consumers play on their phones. They include Words With Friends, Zynga Poker, and Merge Dragons! which lets players combine dragon eggs and treasures to produce skills and objects.

Zynga also has used acquisitions to dial up growth. In 2018, it agreed to buy controlling stakes in Small Giant Games for about $560 million and Gram Games for $250 million. And it has a war chest of cash and short-term investments that’s approaching $1.5 billion, which could be used for additional deals. To raise money, Zynga has sold bonds and made more than $300 million from unloading its San Francisco headquarters in a leaseback deal last year.

Moving Forward…..

Zynga is preparing to reinvent itself again by embracing new platforms and devices -- no matter what they may end up being.

“Ten years from now, I know for a fact that the platforms will be different,” Gibeau said. “There could be other platforms -- like streaming platforms, cloud-based gaming.”

The video-game consoles that dominated the industry for so long may not exist in a decade, opening the door to other options, Gibeau said. “I want our games to be playable on anything, even if it’s a toaster or refrigerator.”

Zynga has already jumped onto Snapchat. And while it hasn’t provided details on what else is in the works, the company is developing a new multiplatform strategy.

“We have a saying, ‘Make platform transition your friend,’” Gibeau said. “You can turn yourself out of position, which frankly Zynga did by being so focused on Facebook.”

Analysts’ Comments.....

“The company has significant live-services expertise and has a strong advertising platform, so it can help rapidly scale promising games as they come to market,” said Matthew Kanterman, an analyst at Bloomberg Intelligence. “All in, Zynga is on firm footing for the next few years.”

KeyBanc's Tyler Parker resumed coverage of Zynga with an Overweight rating and price target of $8.50.

Mobile is the largest and fastest growing segment of the gaming industry, Parker said in a note. It continues to grow in terms of the percentage of time people spend on their phones, and as technology evolves and connectivity both broadens and speeds up as 5G comes into play, higher quality gaming will be possible, he said.

The changing technology is allowing "deeper and more quality games," that are not only better for players, but are being monetized more effectively by companies.

KeyBanc favors mobile-first publishers with scaled and growing portfolios that put emphasis on driving growth through live services.

"We believe the mobile gaming market is attractive given the strong growth expected over the next few years, which should benefit scale mobile-first publishers," Parker wrote in a note.

Zynga, with "proven brands and a deep pipeline," are the draw, along with expanding margins and possible merger and acquisition opportunities.

SunTrust analyst Matthew Thornton initiated coverage of shares of the gaming company with a buy rating and a $7.50 share price target.

Thornton said in a note to investors that the San Francisco-based company, which owns such franchises as Empires & Puzzles, Merge Dragons, and Words With Friends, "provides pure-play exposure to the large and fast growing global mobile game market" with a growing and diversified game portfolio and "highly experienced management team and Board."

"In addition to a healthy existing portfolio, ZNGA has a strong pipeline (at least 7 games, including FarmVille, Harry Potter, Star Wars, Game of Thrones, and others) as well as a strong balance sheet (>$1.4b in cash) and acquisition track record (Small Giant, Gram Games) to augment organic growth with M&A in what is a highly fragmented market," Thornton said.

He said that he expects the company to see upside to consensus expectations over the next several years.

Nearly 100% of Zynga’s pro forma growth in the third quarter came from titles that were acquired under the current leadership team during the past two years, Thornton said, adding he believes mergers and acquisitions are one of Zynga's core competencies.

Thornton said he expects inorganic growth to remain a core piece of Zynga's strategy.

"Our own conversations with private mobile game publishers suggest to us that a sale to Zynga (under the current team) is generally viewed as a desirable outcome," he said.

Baird analyst Colin Sebastian’s Top Pick is social game developer, Zynga. Zynga’s most famous game is Farmville, which was the first game on Facebook to reach 10 million daily active users. Other titles include Zynga Poker and Words with Friends.

Sebastian said, “Mostly, we like Zynga for the visibility from live services, new title launches, potential for more M&A, and 2H improvement in EBITDA margins. Also, we note console transition-year volatility is a bigger near-term risk for traditional game publishers.”

The analyst kept his Outperform rating on Zynga, alongside a price target of $8.

Cowen’s Doug Creutz is a fellow fan of Zynga. The analyst also named Zynga as a ‘’best idea for 2020’’ and called it "the most consistent company in the mobile gaming vertical over the last few years." Creutz, too, reiterated an Outperform rating on the game developer, and kept his $7 price target.

Up-to-date Information.....

At this stage shares have pulled-back a bit, and our trade has halved. However, this may be another great buying opportunity as the pullback or correction for ZNGA may be over.

In the daily bar chart of ZNGA prices have pulled back this month to break below the rising 50-day moving average line and test the rising 200-day moving average line. Prices broke the support around $6.00 but have so far quickly rebounded to the upside.

The market expects Zynga to deliver a year-over-year increase in earnings on higher revenues when it reports results for the quarter ended December 2019.

The stock is expected to move higher if expectations are met in the upcoming earnings report, which is expected to be released on February 5.

This maker of "FarmVille" and other online games is expected to post quarterly earnings of $0.06 per share in its upcoming report, which represents a year-over-year change of +200%.

Revenues are expected to be $417.57 million, up 56.2% from the year-ago quarter.

The consensus EPS estimate for the quarter has been revised 6.25% higher over the last 30 days to the current level. This is essentially a reflection of how the covering analysts have collectively reassessed their initial estimates over this period.

Positive Thoughts.....

Zynga is best known for being the force behind wildly popular games such as “Words With Friends”, “Empires & Puzzles” and “Merge Dragon”. After posting an impressive 70% climb in 2019, there appears that the video game developer still has more fuel left in the tank.

And, according to SunTrust Robinson’s Matthew Thornton, he agrees. In his initiation note, the analyst points out that the already large gaming market, which was worth about $83 billion in 2019, is still expanding, with a 5-year 2018-2023 CAGR of 9.9%. He tells investors the companies that can prosper in this competitive and fragmented environment will be those with platform-exposure to the market, publishers with unique franchises or IP, network scale and ability to fund and execute robust live services, pipeline development and M&A. Based on this, Thornton has high hopes for ZNGA.

“ZNGA provides pure-play exposure to the large and fast growing global mobile gaming market with a growing (31% pro forma in 3Q19, driven by Merge Dragons and Empires & Puzzles) and diversified existing game portfolio and highly experienced management team and Board. In addition to a healthy existing portfolio, ZNGA has a strong pipeline (at least 7 games, including FarmVille, Harry Potter, Star Wars, Game of Thrones, and others) as well as a strong balance sheet and acquisition track record to augment organic growth with M&A in what is a highly fragmented market,” he wrote.

Taking all of this into consideration, the analyst puts the 2-year 2019-2021 revenue and EBITDA CAGR at 13% and 18%, respectively. Not to mention the company is also expected to surpass consensus estimates over the next few years.

In line with his bullish thesis, Thornton started his ZNGA coverage with a Buy recommendation.

Looking at the consensus breakdown, 6 Buys, 1 Hold and 1 Sell published in the last three months add up to a Moderate Buy.


Option Trade – Advanced Micro Devices, Inc. (NASDAQ:AMD) Calls

Friday, January 31, 2020

** OPTION TRADE: Buy AMD MAR 20 50.000 CALL at approximately $2.80.

Place a pre-determined sell at $5.60.

Also include a protective stop loss of $1.15.

The Santa Clara, Calif.-based company Advanced Micro Devices, Inc. (NASDAQ:AMD), a global semiconductor company, reported earnings this week, Tuesday January 28, 2020, after the market closed. AMD reported revenue and earnings of $2.13 billion and $0.27, better than the Consensus Estimates of $2.10 billion and $0.26.

Advanced Micro Devices Inc. shares fell Wednesday as soft console chip sales overshadowed data-center sales and while more than half the analysts covering the highflying stock hiked price targets.

AMD shares finished down 6% at $47.51, following an intraday low of $46.10, for their worst one-day performance since August 23, when summer trade war fears had reached a peak.

AMD stock was the biggest gainer on the S&P 500 in both 2018 and 2019. Over the past 12 months, AMD shares have rallied 147%, while the S&P 500 has gained 24%, the Nasdaq has grown 32% and the SOX chip index has increased 50%.

Of the 38 analysts who cover AMD, 14 have buy or overweight ratings, 21 have hold ratings and three have sell or underweight ratings. Of those 21 hiked their price targets, while one lowered theirs, resulting in a price target of $46.59, up from the previous day’s $43.30.

Expect AMD to recover and send their shares upwards.

Positive Factors…..

In the short term, one big headwind was AMD’s first-quarter revenue guidance of $1.75 billion to $1.85 billion while analysts had forecast $1.86 billion. AMD blamed soft console sales ahead of Sony Corp. and Microsoft Corp. rolling out new consoles later in the year. For the year, AMD’s forecast of a 28% to 30% rise in revenue, versus the Street’s forecast of 28%, hinged on an improvement in the second half of the year.

AMD's results reflected a clean beat and a bit weaker guidance for the first quarter. Strength in EPYC server CPUs were offset by weaker consoles ahead of new platforms and seasonal PC CPUs.

The 2020 sales growth guidance of 28-30% reflects expectations that the company will gain share again. CEO Lisa Su's huge Street credentials and Intel's 2020 guidance that calls for decelerating sales throughout the year render AMD's guidance as reasonable and achievable.

There appears to be significant upside for 2021/22, which makes this the AMD multi-year share-gain, dollar content gain CPU/GPU compute story that deserves a higher P/E multiple.

Momentum in Ryzen, Radeon and EPYC processors remains a key catalyst.

In the high-end desktop market, the company is banking on growing clout of its third-generation Ryzen Threadripper processor.

Moreover, Ryzen 4000 mobile processors powered laptops from ASUS, Acer, HP, Dell, Lenovo and other major OEMs, slated for release in 2020, are expected to help AMD in expanding presence in the commercial market.

Analysts….

Jefferies analyst Mark Lipacis, who has a buy rating and raised his price target to $58 from $56, called the outlook “conservative” and said that the company’s March 5 analyst day should be a catalyst for the stock. Lipacis feels sales of the company’s data-center Epyc chip still has a way to go.

“We expect server share gains to accelerate as cloud customers become more familiar with Epyc,” Lipacis said.

As well, Cowen analyst Matthew Ramsay, who has an outperform rating and a $60 price target, said “not much fundamentally changed” with AMD other than the soft console sales.

“While 1Q20 came in light due entirely to console seasonality, 2020 guidance should allow investors to feel comfortable with upside to consensus,” Ramsay said. “Importantly, we believe the guidance sets the table for upward revisions throughout the year with notebook & console the largest potential upside drivers, while server growth will be of the highest magnitude.”

Also, Summit Insight Group analyst Kinngai Chan upgraded shares of AMD from Hold to Buy.

AMD's computing and graphics fourth-quarter sales rose 30% quarter-over-quarter, thanks to client CPU market share gains and new GPU product launch, Chan said in a note. Weakness in game console business led to a sequential decline in revenues at its Enterprise, Embedded, and Semi-Custom business but gross margin expanded to 45% on favorable product mix.

Chan believes AMD gained significant market share in PCs in 2019 at its corporate average margin. Helped by sales of 7nm server CPUs, AMD will likely take share from Intel Corporation (NASDAQ: INTC) in 2020, at higher-than-corporate average margin.

The analyst expects gross margin expansion to accelerate through 2020 due to a higher contribution from its Server/data center business.

"While the risk of Intel price aggression remains, we believe AMD's design wins in the server/datacenter has hit a critical mass and should give AMD plenty of gross margin leverage through 2020," Chan wrote in a note.

Several other analysts have recently commented on the company…..

  • Rosenblatt Securities analyst Hans Mosesmann maintained a Buy rating and $65 price target.
  • Wedbush analyst Matt Bryson reiterated an Outperform rating and hiked the price target from $51.50 to $75. Although trimming its estimates to match AMD's guidance, Wedbush raised its 2021 numbers, assuming more EPYC sales – a result it feels will create a more favorable growth and margin profile for the year.
  • Wells Fargo analyst Aaron Rakers maintained an Overweight rating and $55 price target.

Summary

AMD has set a very beatable bar. The guidance implied a significant second-half slowdown in Computer and Graphics revenue growth and little like-for-like gross margin appreciation. Given the fourth-quarter strength in the faster growing Computing and Graphics and EPYC server markets, there seems to be plenty of room for upside.


Option Trade – Splunk Inc. (NASDAQ:SPLK) Calls

Thursday, January 30, 2020

** OPTION TRADE: Buy SPLK FEB 21 160.000 CALL at approximately $2.80.

Place a pre-determined sell at $5.60.

Also include a protective stop loss of $1.15.

The data analytics software provider  Splunk Inc. (NASDAQ:SPLK), delivering usable insights into digital systems -- everything from websites and apps to servers and mobile devices, has done quite well since reporting earnings on November 21.

The company is a pioneer in the field of providing software that helps organizations search, correlate, analyze, monitor and report on data in real time.

Without reiterating the information in regard to these earnings it would be best to read the article “Splunk Q3 Earnings and Revenues Beat Estimates!” As you will note, “Earnings Predictions” members made potential profits of 232%.

Also, “Armchair Traders” entered a trade on Splunk earlier last year, March 27, 2019, and made 100% profit on a call trade. Let us be optimistic that this positiveness will continue for this trade.

The share price has continued to climb since the earnings were presented, until hitting the stock market barrier early December where the indexes took a hit. The stock has basically traded side-ways since then and is now looking for the next catalyst to push further upwards.

Splunk has gained 3.12% over the past month. This has outpaced the Computer and Technology sector's gain of 2.89% and the S&P 500's gain of 0.19% in that time.

Positive Factors…..

Splunk recently acquired cloud monitoring company SignalFX for $1.05 billion, which is estimated to could contribute $84 million to revenue next year.

Splunk also changed some of its financial reporting, providing more clarity on its organic growth and other business metrics.

Splunk added 450 new enterprise customers in the reported quarter. The company had 134 orders greater than $1 million in total contract value, up 21% from 111 last year.

Splunk unveiled its Data-to-Everything Platform in the third quarter including new products such as Data Fabric Search (DFS), Data Stream Processor (DSP) and Splunk Mission Control.

Additionally, the company also announced new versions of Splunk Enterprise 8.0 and Splunk Enterprise Security 5.0, designed to process massive scale to data in any form.

Splunk announced the acquisition of Omnition, a stealth-mode SaaS company that is innovating in distributed tracing and improving monitoring across micro-services applications.

The company also announced acquisition of the open source distributed messaging leader Streamlio. Management expects that the acquisition will help accelerate Splunk’s real-time stream processing.

The Expected Earnings.....

Splunk will present their next earnings on February 27, 2020.

For fourth-quarter fiscal 2020, Splunk expects revenues of roughly $780 million. Non-GAAP operating margin is likely to be 23%.

Management expects that the elimination of perpetual licenses will increase renewable mix to 99% in the fourth quarter and high 90% for fiscal 2020.

For fiscal 2020, Splunk anticipates revenues of almost $2.35 billion, up from the previous guidance of $2.3 billion. The company maintains its non-GAAP operating margin target of 14%.

The company now expects operating cash outflow for the remainder of the fiscal. Splunk projects operating cash outflow of $300 million for fiscal 2020.

Influencing Factors…..

Splunk helps enterprises of all shapes and sizes turn their raw machine data into valuable and actionable insights through their Data-to-Everything platform. Three big trends will promote increased adoption of this platform over the next several years.....

  1. The volume of data globally will surge higher thanks to a proliferation of data-generating devices, like smart watches, smartphones, smart appliances, smart cars, etc.
  2. The ability to generate valuable insights from that data will get better and better, thanks to things like machine learning.
  3. Enterprise data-driven decision making will go from luxury to necessity, as companies that don’t do it will be left behind the curve.

Therefore, Splunk projects to go from a niche data analytics platform today, to a must-have data-driven decision making companion by 2025. This transition will power sustained long term gains in Splunk stock.

Also, in 2020, SPLK stock will be pushed higher by.....

  1. increased enterprise software spending trends,
  2. continued migration from a legacy license model, to a cloud-based business model, and
  3. a 5G boom accelerating the data growth narrative.

Analysts….

The Wells Fargo team in its recent software stocks update was upping its price target on big data company Splunk to a Street-high $200, calling for another 30%-plus upside in shares over the next twelve months.

Several other analysts have recently commented on the company…..

  • Morgan Stanley upped their price objective on shares of Splunk from $169.00 to $185.00 and gave the stock an “overweight” rating in a research report on Monday, January 13th.
  • SunTrust Banks upped their price objective on shares of Splunk from $175.00 to $190.00 and gave the stock a “buy” rating in a research report on Tuesday, January 14th.
  • Splunk had its price target upped by Argus from $156.00 to $190.00 in a report published on Tuesday last week . The brokerage currently has a buy rating on the software company’s stock.
  • Splunk had its target price upped by stock analysts at Credit Suisse Group from $150.00 to $170.00 in a research report issued on Monday, January 13th. The firm currently has an “outperform” rating on the software company’s stock.
  • Finally, UBS Group reaffirmed their buy rating on shares of Splunk in a research report published on Monday, January 13th. They currently have a $176.00 target price on the software company’s stock.

Shares of Splunk have been given a consensus rating of “Buy” by the thirty-six brokerages that are covering the company. One research analyst has rated the stock with a sell rating, six have issued a hold rating and twenty-nine have given a buy rating to the company. The average twelve-month target price among brokerages that have issued ratings on the stock in the last year is $161.10.

Summary

Splunk’s 50 day moving average is $151.26 and its 200-day moving average is $131.32. Splunk has a 1 year low of $107.16 and a 1 year high of $161.49. The company has a market capitalization of $24.71 billion, a P/E ratio of -75.98 and a beta of 2.06. The company has a debt-to-equity ratio of 1.06, a quick ratio of 2.33 and a current ratio of 2.33.


Option Trade UPDATE – Microsoft Corporation (NASDAQ:MSFT) Calls

Monday, January 27, 2020

IMPORTANT NOTE:

Dow Jones futures tumbled Monday morning, along with S&P 500 futures and Nasdaq futures.

Traders across the globe are starting the week in risk-off mode amid growing concerns over the potential economic damage from the fast-spreading coronavirus. In the U.S., Dow futures plunged 477 points, while futures on the S&P 500 and Nasdaq are down 1.7% and 2.1%, respectively.

It would be advisable to enter this trades at the lowest possible price – an entry price has been given but this may change dramatically after the market opens – so take heed.


Option Trade – Microsoft Corporation (NASDAQ:MSFT) Calls

Monday, January 27, 2020

** OPTION TRADE: Buy MSFT FEB 21 170.000 CALL at approximately $3.00.

Place a pre-determined sell at $6.00.

Also include a protective stop loss of $1.20.

Services-provider company Microsoft Corporation (NASDAQ:MSFT), the tech titan, continues to break financial records. And members of Stock Options Made Easy have made great potential profits from Microsoft shares in the past 12 months.

More of the same in 2020 and beyond is expected after a strong 2019 in which Microsoft’s market valuation surged past $1 trillion.

Evercore ISI analyst Kirk Materne agrees with this statement according to a Jan. 22 note, that maintains an Outperform rating and price target of $180, in his report’s title “MSFT -- More Popular Than Baby Yoda.”

Materne forecasts strong second-quarter results – indeed the next three to five years – because of Microsoft’s cloud portfolio, its growing annuity revenue base, and its strong balance sheet. Microsoft Azure should grow 53% year-over-year in 2020, he said. Office 365, he added, “continues to see a long runway in terms of transitioning customers to higher SKUs.”

Microsoft shares have surged 55% over the last year to outpace the likes of Facebook FB and Amazon AMZN. This climb is part of a much longer run from the historic tech powerhouse, as it expands its cloud computing business.

Once again, we have a situation where an earnings report is expected – on Wednesday, after the market closes – which is not the norm for these recommendations.

Last week we recommended Swiss chipmaker STMicroelectronics NV (NYSE: STM) just before earnings and came away with potential profits of 120%.

And as a warning to new members, as existing members already know I rarely recommend a trade (except for Earnings Predictions Members) just before earnings, but this seems to be a great opportunity that shouldn’t be missed. However, do not bet the farm on this trade – read the following information…..

When To Exit A Trade Based On Earnings?.....

It is also worth considering, when options trading earnings reports – “Do we exit on already existing profits or leave the companies to report their earnings and hope for bigger profit?” 

As most traders realize, there is a 50/50 chance that the company stock price could go either way after reporting earnings – even if the report is good, the stock price could reverse – and if you hold a call option, means depletion of an already good profit if it exists. A similar situation can be found if you hold a put option, and a report is not that sound (and you expect a profit from this) but the stock price can, at times move upwards due to traders bias or other external conditions......READ MORE.....

The Expected Earnings.....

Microsoft is confirmed to report earnings at approximately 4:10 PM ET on Wednesday, January 29, 2020. The consensus earnings estimate is for $1.32 per share on revenue of $35.69 billion; but the Whisper number is higher at $1.38 per share.

Consensus estimates are for year-over-year earnings growth of 20.00% with revenue increasing by 9.91%.

Last quarter, the company’s Intelligent Cloud revenue surged 27%, driven by 59% expansion in the key Azure division. The Redmond, Washington-based firm’s other businesses, from Office and Windows to gaming and devices have also evolved and expanded.

Influencing Factors…..

Overall earnings estimates have been revised higher since the company's last earnings release.

Momentum in Microsoft’s cloud computing platform — Azure — is likely to have contributed to the fiscal second-quarter performance.

Microsoft’s hybrid cloud is well positioned against market leader Amazon.com Inc. and third-place Alphabet Inc.’s Google.

Morgan Stanley concluded Microsoft is widening its lead as the preferred hybrid cloud vendor, with 42% using or likely to use Microsoft vs. 21% for AWS.

Credit Suisse’s survey showed Azure as the preferred cloud enterprise option for 76% of respondents.

“We remain constructive on the long-term opportunity for Microsoft, supported by our CIO survey that suggests share gains in the cloud as well as our bottom-up analysis indicating commercial cloud revenues could exceed $100bn in 5 years,” Credit Suisse analyst Brad Zelnick said in a Jan. 13 note. He raised his price target to $180 from $155, with a “blue-sky valuation” of $200.

As well, the company has been strengthening Office 365 and Dynamics 365 suite of solutions to boost enterprise productivity. The launch of HoloLens 2 and Azure Kinect DK, and the acquisition of Mover remain crucial in this regard. These initiatives are expected to have driven subscriber base.

Microsoft is striving to enhance the LinkedIn platform with robust AI, CRM capabilities at different levels, while maintaining user data privacy preferences. This is expected to have bolstered the adoption of LinkedIn’s subscription products, comprising membership, recruitment and education programs.

In the gaming segment, the tech giant is expected to have benefited from an increase in Xbox Live monthly active users and the adoption of Game Pass subscriptions.

Also, a seasonal uptick on holiday season and an improving PC shipment trend in the fourth quarter of 2019 are likely to have generated incremental revenues from Surface devices.

Microsoft unveiled the latest capabilities to IoT Central, Azure IoT Hub and Azure Maps, with an aim to deliver advanced IoT solutions with robust security capabilities. Moreover, the acquisition of Movere is expected to enhance Azure’s cloud-migration solution, Azure Migrate.

These new capabilities are likely to have bolstered the adoption of Azure, consequently contributing to the top line in the fiscal second quarter.

Analysts….

Wells Fargo upped its price target on cloud giant Microsoft and reiterated its “overweight” rating on the stock. Microsoft’s cloud infrastructure offering, Azure, has been rapidly gaining on AWS for several years now. This culminated in late 2019, when the two services went head-to-head in a competition for a multi-billion dollar Pentagon cloud contract. Microsoft won.

Piper Sandler analyst Brent Bracelin maintains an Overweight rating on Microsoft with a price target lifted from $158 to $190.

2020 will be a "defining year" for Microsoft as it is backed by $67 billion in net cash and investments which can be used to bolster its business through M&A deals, Bracelin wrote in a note. In addition, the company can count on another $200 billion in operating cash flow over the next three years to further "enhance its position as a trusted enabler" of the digital enterprise market.

Specifically, Microsoft could see upside from four catalysts, including acceleration in cloud revenue from 8.5% over the past decade to 12% CAGR over the next three years, growth in developer popularity through recently acquired GitHub and Visual Studio Code and a strong outlook from gaming that will benefit from the first major console refresh in seven years.

As well, Raymond James analyst Micheal Turits raised his price target by 18% last week, as his research suggests the software giant had a strong quarter, led by software upgrades and growth in its cloud business. Turits reiterated his strong buy rating and lifted his target on the stock to $192, which is 15% above current levels, from $163.

"Our Microsoft checks were strong this quarter with the biggest improvement from resellers that were seeing an uptick in Office 365 E3 to E5 conversions, on increased interest in collaboration and integration of Microsoft Teams and from security including EMS, Azure Active Directory and Azure Sentinel," Turits wrote in a note to clients. "We believe channels are on plan if not hitting stretched or aggressive growth targets with Azure, with some constraint around talent needed for cloud migrations."

And, Microsoft had its target price boosted by Morgan Stanley from $157.00 to $189.00 in a note issued to investors on Wednesday, January 8th. The brokerage currently has an “overweight” rating on the software giant’s stock.

Also, Microsoft‘s stock had its “buy” rating reiterated by analysts at Jefferies Financial Group in a note issued to investors on Thursday, January 9th. They presently have a $185.00 price objective on the software giant’s stock, up from their prior price objective of $160.00.

Summary

Microsoft’s cloud infrastructure offering, Azure, has been rapidly gaining on AWS for several years now. This culminated in late 2019, when the two services went head-to-head in a competition for a multi-billion dollar Pentagon cloud contract. Microsoft won.

Microsoft has a 12 month low of $102.17 and a 12 month high of $168.19. The company has a market cap of $1,271.87 billion, a P/E ratio of 31.08, and a P/E/G ratio of 2.61 and a beta of 1.23. The company has a quick ratio of 2.81, a current ratio of 2.85 and a debt-to-equity ratio of 0.69. The company’s 50-day moving average price is $158.88 and its 200-day moving average price is $144.97.