Shares of Microsoft Corporation MSFT touched a new 52-week high of $55.23 on Dec 1, eventually closing at $55.22. The company returned 14.9% in the past one year and roughly 18.9% year-to-date. Average volume of shares traded over the last three months was approximately 34,641K.
What's Driving Microsoft?
Microsoft is one of the largest software companies in the world. Its operating systems are installed on a majority of computers across the world. It is also a leader in the emerging cloud computing market. Microsoft's cloud offerings include Windows Azure, Office 365 and Dynamics CRM.
The bullish stance of equity research analysts at Raymond James and FBR on the stock is driving Microsoft.
Raymond James' analyst Michael Turits upgraded the rating on Microsoft from “Market Perform” to “Strong Buy”, and gave a price target of $62.00. He is optimistic about the company’s successful transition from PC software to cloud computing. Turits sees the company as “the only 'hyperscale' hybrid cloud vendors able to integrate Infrastructure-as-a-Service (IaaS), Platform-as-a-Service (PaaS), and Software-as-a-Service (SaaS) with a vast installed base of on-premise server and client software".
FBR analyst Daniel Ives also rated Microsoft as “Outperform” on strong cloud prospects. He believes that though Amazon Web Services (AWS) is a leader in the cloud space, Microsoft’s Windows Azure has the potential to capitalize on the increasing demand for cloud-computing services in the enterprise sector.
The price appreciation may be attributed to Microsoft’s strong fundamentals, solid growth of its cloud service, strong Windows adoption and better-than-expected first-quarter 2016 results reported on Oct 22. Since then, the stock has gained 15.7%.
In the quarter, Microsoft reported a profit of 67 cents, breezing past the Zacks Consensus Estimate of 58 cents. In response, shares jumped almost 8% in extended trading. However, revenues were down 8.1% sequentially and 12.2% year over year.
Also, Microsoft’s Surface is doing very well despite the temporary softness that is typical before a product release and difficult comps from the previous-generation product released last year.
Moreover, the Zacks Consensus Estimate for fiscal 2016 earnings moved up 2.83%. Additionally, the company has delivered an average positive earnings surprise of 14.45% over the trailing four quarters backed by the robust business portfolio.
Microsoft currently has a Zacks Rank #3 (Hold).
Stocks that Warrant a Look
Some stocks in the technology space worth considering are Aspen Technology, Inc. AZPN, Autodesk, Inc. ADSK and Cadence Design Systems Inc. CDNS. All these stocks sport a Zacks Rank #1 (Strong Buy).
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