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Brand Face-Off: Apple Inc. (AAPL) vs. Microsoft Corporation

Evaluating AAPL and MSFT from technical and sentiment viewpoints

by 1/27/2014 1:12:35 PM
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The match-up between Apple Inc. (NASDAQ:AAPL) and Microsoft Corporation (NASDAQ:MSFT) is among the most storied rivalries in modern tech history. Mac OS versus Windows, iPad versus Surface, iPhone versus Windows Phone, etc. -- the two companies are continually competing in multiple markets.

Meanwhile, on the charts, both firms have had a fair share of success. On the one hand, AAPL has gained about 25% year-over-year to $548.86, helped for the past six months by support from its 80-day moving average. On the other hand, MSFT has tacked on nearly 30% in the last 12 months to trade at $36.23, ushered higher by its ascending 40-week moving average.

Daily Chart of AAPL since May 2013 With 80-Day Moving Average

Weekly Chart of MSFT since February 2013 With 40-Week Moving Average

Turning to sentiment, AAPL has racked up a 50-day call/put volume ratio of 1.87 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), with nearly two calls bought to open for each put during the past 10 weeks. What's more, the ratio ranks in the bullishly skewed 64th percentile of its annual range. Similarly, MSFT's ISE/CBOE/PHLX 50-day call/put volume ratio of 2.13 is docked in the 76th percentile of its annual range, which means traders have picked up calls over puts at a faster-than-usual pace in recent months.

On a related note, Schaeffer's put/call open interest ratio (SOIR) for Apple is 0.53, as call open interest nearly doubles put open interest among options set to expire in the next three months. Relatively speaking, this SOIR is just 8 percentage points from an annual low, conveying short-term traders have been more call-skewed a mere 8% of the time in the past year. By contrast, Microsoft's SOIR of 0.69 -- while tipped in the direction of calls -- registers in its 52nd annual percentile, which suggests the current open interest configuration is relatively typical, historically speaking.

In terms of the Street's posture toward the two tech names, analysts are much more bullish on AAPL, which has received 28 "buy" or better recommendations, compared to just seven "holds" and not a single "sell" rating. Also, the Mac manufacturer's average 12-month price target of $598.88 is 9.1% above the stock's current price. On the other side of the fence, the brokerage bunch has handed out just 11 "buy" or better endorsements to Bill Gates' brainchild, versus 10 tepid "holds" and one "sell" suggestion. On top of that, MSFT's consensus price target of $37.26 is only 2.8% above the security's price. In other words, the equity may be positioned to benefit from a round of analyst upgrades and/or price-target hikes.

From a contrarian perspective, this final consideration is crucial. While both stocks have performed solidly over the long term, the potential for Microsoft Corporation (NASDAQ:MSFT) to benefit from bullish brokerage notes gives it the slight edge over Apple Inc. (NASDAQ:AAPL) in this brand face-off.

Plus, traders should be aware that AAPL is due to report its fiscal first-quarter earnings after tonight's closing bell. Analysts, on average, are expecting a profit of $14.07 per share, up from $13.81 in the year-ago period. The tech giant has surpassed bottom-line estimates in five of its last seven quarterly reports, but has nevertheless suffered an average loss of 0.4% in the three days post-earnings.

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