Cowen Lifts Microsoft Stock Price Target on Azure Strength

Microsoft's Azure business generated sales growth of 90% last quarter

Josh Selway
May 23, 2018 at 9:13 AM
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Microsoft Corporation (NASDAQ:MSFT) has been one of the best Dow stocks in 2018, up 14% year-to-date and hitting a record high of $98.69 on May 14. Much of the success has been driven by the growth of the company's cloud service Azure, and brokerage firm Cowen and Company is expecting this trend to continue. The firm cites a recent survey which it says showed growth in MSFT's cloud business will slow less than expected going forward, and that Azure customers are less likely to switch to a competing service than those using Amazon's or Google's cloud platforms. Cowen maintained its "outperform" rating and raised its price target to $112 from $105 -- a nearly 15% premium to yesterday's close of $97.50.

However, such high expectations have become the norm among analysts. The average 12-month price target is actually just below Cowen's mark, coming in at $110.64. Overall, there are 26 brokerage firms in coverage on the blue chip, and 21 of them have issued "buy" or "strong buy" recommendations.

As for options activity, traders remain committed to calls. The security's 10-day call/put volume ratio across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands at 2.55, showing long calls have easily doubled puts in the past two weeks. Meanwhile, the front-month June series has stayed popular, as peak open interest still sits at the June 100 call. Roughly 62,834 contracts reside here, compared to fewer than 52,000 at the next closest strike.

Whether you're bullish or bearish, the Schaeffer's Volatility Index (SVI) for Microsoft shows it's a good time to target near-term options. This indicator currently reads at 17%, ranking in the low 16th annual percentile, showing lower-than-normal volatility expectations at the moment.


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