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Microsoft Stock Brushes Off Post-Earnings Bull Notes

Options traders are focusing on calls this morning

Digital Content Manager
Oct 28, 2020 at 9:51 AM
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The shares of Microsoft Corporation (NASDAQ: MSFT) are down 2.8% at $207.25 this morning, despite the tech giant's adjusted fiscal first-quarter earnings of $1.82 per share -- significantly higher than Wall Street's estimates of $1.44 per share -- and revenue beat. The company attributed the strong quarterly results to the acceleration of its cloud computing business and new Microsoft Teams users, as the pandemic led to an online learning and remote work shift. As a result, the equity earned no less than six price-target hikes, including one from Cowen and Company to $245 from $230.

On the charts, Microsoft stock had been carving a channel of higher highs since April, culminating in a Sept. 2 record of $232.86, which is nearly double its mid-March lows. And while shares have cooled off from that peak, the 100-day moving average contained the equity's latest pullback. Longer term, MSFT sports a 47.8% year-over-year lead.

Analysts were majorly optimistic toward the security coming into today, with 20 of the 22 in coverage sporting a "strong buy" rating, and only two carrying a tepid "hold." Echoing this is the 12-month consensus target price of $237.76, which is a 14.7% premium to current levels.

An unwinding of pessimism in the options pits could send MSFT higher. The stock  sports a 10-day put/call volume ratio at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) that sits in the 89th percentile of its annual range. This suggests a healthier-than-usual appetite for bearish bets of late.

Today though, calls are quite popular. In just the first half hour of trading, over 69,000 calls have changed hands, three times the average intraday amount and double the number of puts traded. Most popular so far is the weekly 10/30 215-strike call, followed closely by the 205-strike put from the same series.


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