by Ian Harvey
November 08, 2019
Microsoft stock is consolidating and preparing for the next leg up.
The Pentagon awarded MSFT with a 10-year contract to build the U.S. Department of Defense’s (DoD) Joint Enterprise Defense Infrastructure project (JEDI).
We are positioned for this incline.
Services-provider company Microsoft Corporation (NASDAQ:MSFT), the tech titan, has been in a race to corner what’s likely to be one of the hottest – and most profitable – tech trends of the next decade.
By the end of this year, the cloud computing industry is expected to grow 17.5%, topping $214.3 billion in global value.
However, since late October Microsoft stock has been trading sideways in a tight range. But, the stock prices are above the rising 50-day moving average line, as well as the bullish 200-day line. The On-Balance-Volume (OBV) line shows a rising pattern from December, and that signals that buyers of MSFT have been more aggressive than the sellers.
So far, MSFT has gained 43.11% in 2019. And as the move to the cloud ramps up, Microsoft stands to be a major beneficiary. The latest government contract won by the company's cloud arm Azure has only increased demand for the stock.
On Friday, October 25, the Pentagon announced plans to award Microsoft with a 10-year contract to build the U.S. Department of Defense’s (DoD) Joint Enterprise Defense Infrastructure project (JEDI).
The contract, worth upwards of $10 billion, has the potential to change the face of the cloud computing industry and provide us with a great MSFT options trade.
The Pentagon’s JEDI proposal is the department’s biggest effort to date to take advantage of cloud computing technology. It’s the military’s first significant effort to unify the nation’s digital defense infrastructure.
According to the proposal for JEDI, the nation’s defense branches have consistently lacked “a coordinated enterprise-level approach to cloud infrastructure,” which has “prevented warfighters and leaders from making critical data-driven decisions.”
A unified cloud computing system gives the United States an edge in global conflict. Without it, the defense department risks lagging behind the world in digital infrastructure.
And, Microsoft is a front-runner in hybrid provisioning, and has been from the beginning, made the hybrid approach central to its cloud strategy. Moreover, this approach has given it the flexibility to support the DoD in its mission-critical operations. So if the DoD is in a hurry, there’s reason for it to choose Microsoft.
Microsoft has also kept its approach more collaborative than any other player, which means that going with it will allow the government the greatest flexibility to use the best technology from a diverse supplier base.
The DoD’s prior contracts with the company, including the Windows 10 and $1.76 billion enterprise service contracts, may even have supported the decision to go with Microsoft.
To the keep the U.S. defense forces on the cutting edge, Microsoft has the mammoth task of reworking the DoD’s entire digital infrastructure. This will equip the military with new digital defenses and processing power.
It will keep Microsoft busy for years, and it’s likely only the beginning for the firm.
You see, by clinching the Pentagon’s $10 billion contract, Microsoft is on track to become the undisputed king of the cloud computing industry.
In its most recently reported quarter, Microsoft’s commercial cloud computing platform, Azure, grew 59% year over year – an incredible expansion for an already well-established firm.
Microsoft is in the process of closing deals with both Oracle and SAP to offer Microsoft cloud services through their digital platforms.
With a market capitalization of more than $1 trillion, Microsoft has more than enough capital to finance its future expansion into the cloud computing industry.
As a result, the company could likely eclipse cloud competitors in the near future.
The average analyst predicted a 12% gain for Microsoft stock over the next 12 months – but that was before the $10 billion contract. Now, it’s much more likely to soar.
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MSFT shares have been trading in an ultra-tight range between $132 and $144 since mid-June. Long bases allow tension to build, so Microsoft’s stock price has been coiling for a breakout of epic proportions.
But, a sustainable breakout requires some sort of catalyst—or at least an excuse. And, in this case, the excuse stemmed from the US Pentagon rejecting Amazon (AMZN) and instead awarding a contract to Microsoft valued at $10 billion.
Microsoft has been a stellar performer in 2019, surging more than 43% on a total returns basis since the calendar flipped to January. That's almost double the return of the rest of the S&P 500 year to date.
Come and join us at Stock Options Made Easy and see what options trade we have entered based on Microsoft stock.
The question remains: “How high will Microsoft stock climb?”
What has “Stock Options Made Easy” advised members to do?
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