by Ian Harvey
March 11, 2020
Microsoft Inc stock dropped to $150.47 in Monday’s market. Then Tuesday saw the stock as high as $ 161.03, up nearly 7.0%.
Members of Stock Options Made Easy make 102% potential profit using a PUT OPTION.
Maybe it is time take advantage of the speed-bump that this tech giant has encountered.
According to Wedbush analyst Dan Ives, Microsoft Inc is well positioned to continue to benefit from the shift to cloud services and ongoing momentum in hardware such as the Surface. Investors just need to ride out the short-term volatility.
“Despite near-term worries, we believe Azure's cloud momentum is still in its early days of playing out within the company’s massive installed base, the Office 365 transition for both consumer/enterprise is providing growth tailwinds over the next 12 to 18 months (at least), and newer integrated product initiatives around consumers and cloud services (LinkedIn) are front and center,” Ives wrote in his most recent note on Microsoft Inc to clients.
Microsoft’s shares have been under heavy pressure amid the widespread sell-off across the board on worries of the coronavirus resulting in an economic slowdown.
Unlike other large companies suffering greatly by the coronavirus the chance of Microsoft cutting its dividend is completely unlikely given the company’s sizable cash position.
In fact, Microsoft may just raise its dividend again very soon to lure nervous shorter term investors back into the stock.
Ives has a $210 price target on Microsoft, representing at least 36% from current levels.
Microsoft’s stock has plunged 19% over the past month on fears of delayed hardware production out of coronavirus stricken China. Also, some in the market have feared business slowdowns will trigger a delay in capex spending that could delay the shift to Azure.
The Trade at the Time.....February 28, 2020.....we wrote.....
“Services-provider company Microsoft Corporation (NASDAQ:MSFT), the tech titan, saw its shares fall by 7.05% at close yesterday, to finish at $158.18, after warning that the coronavirus outbreak would negatively impact its Windows PC business.
Pre-market, today, the stock is at $154.26, down another 2.48%. Obviously this will change again by the time the market opens.
Late Wednesday, Microsoft said it likely will miss its sales guidance for the current quarter in its Windows PC unit. Windows software and Surface computer sales have been "more negatively impacted than previously anticipated," it said in a news release.
On Jan. 29, Microsoft issued fiscal third-quarter sales guidance for its More Personal Computing segment of $10.75 billion to $11.15 billion. That guidance range was wider than usual "to reflect uncertainty related to the public health situation in China."
"Although we see strong Windows demand in line with our expectations, the supply chain is returning to normal operations at a slower pace than anticipated at the time of our Q2 earnings call," Microsoft said.
In the December quarter, Microsoft's More Personal Computing segment accounted for 35.8% of the company's total revenue.
Also Thursday, market research firm IDC lowered its 2020 forecast for personal computer sales in part because of the Covid-19 coronavirus outbreak. It sees shipments of personal computing devices falling 9% to 374.2 million units in 2020. Its forecast includes desktop PCs, notebooks, workstations and tablets. IDC previously forecast a decline of 6.8% this year.
IDC cited two significant factors for the expected PC shipment decline this year….
First, the transition from Windows 7 to Windows 10 lifted PC sales last year and creates tougher year-over-year growth comparisons.
Second, the spread of Covid-19 is hampering PC supply and possibly demand.
"We expect the road to recovery for China's supply chain to be long, with a slow trickle of labor back to factories in impacted provinces until May when the weather improves," IDC analyst Linn Huang said in a news release. "Many critical components such as panels, touch sensors, and printed circuit boards come out of these impacted regions, which will cause a supply crunch heading into Q2."
YOU NEED TO BE IN TO PROFIT!
Wedbush analyst Dan Ives pointed out that most of Microsoft’s revenue and valuation are based on its flagship Azure, Office 365, and core enterprise driven franchise.
Microsoft’s non-PC business is expected to grow in the low-to mid-teens over the coming years on the heels of its cloud business. Ives said that more than 90% of this revenue is “essential/high priority” for enterprises.
So, even if a softer economic environment results in a 10% hit to the cloud and enterprise growth drivers, “we are still looking at what we value as a $900 billion to $1 trillion valuation cloud franchise off our FY21 revenue/EPS targets,” the analyst wrote.
While markets could continue to be volatile, Microsoft Inc “remains the best way to play the transformational cloud shift for the coming years,” Ives said.
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