Analyst Says Microsoft Cloud Business Can't Compete with Amazon

Short-term traders are call skewed on MSFT

by Josh Selway

Published on Jun 25, 2019 at 10:22 AM

Jefferies has been the only brokerage firm with the equivalent of a "sell" rating on Microsoft Corporation (NASDAQ:MSFT), though that really hasn't worked out for the covering analyst, as the blue chip has jumped almost 36% year-to-date. The brokerage firm this morning released a new note in which it raised its price target to $90 from $80 -- but kept its overall bearish view in place and bashed Microsoft's Azure cloud business.

More specifically, Jefferies said "Azure is not AWS," referring to Amazon.com's (AMZN) cloud unit Amazon Web Services. The analyst note suggested MSFT's business will never see the margin expansion some are expecting, and added that the recent increase in cash flow from Windows won't last.

For reference, the average 12-month price target is $143.90, not far from today's price of $136.66, while the shares hit an all-time high of $138.40 just yesterday. The stock got a boost earlier this month when the company revealed its new Xbox, and its 14-day Relative Strength Index (RSI) has since gone into overbought territory, coming in at 72 today.

Looking at options data, peak open interest resides at the July 135 call, where there's been a mix of buying and selling activity, much of it taking place in the past 10 days. As such, it's not surprising to see Microsoft's Schaeffer's put/call open interest ratio (SOIR) come in at a call-heavy 0.64, ranking in just the 6th annual percentile.


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