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Upcoming Windows “Creators update” turns Microsoft bullish

Since June 2016, the stock of software giant Microsoft Corporation had appreciated nearly 30%. In fact, the company had outrun all other tech giants and also the S&P 500 index, which gained only 9.55% y-o-y.

On December 22nd , 2016, the stock recorded a new 12-month high of $64.10 – nearly 17 years after the company recorded its previous historic high- and analysts are optimistic about the future prospects of the company which was dwindling a few years back.

The following details underline the reason for our bullish view of the stock.

The slides shown during the WinHEC (Windows Hardware Engineering Community) event held in China indicated that the Redmond-based company would be introducing next version of Windows 10 (referred to as “Creators Update”) soon (insider info points to March’17). The most important aspect in the version is the support offered to the 802.11ad Wi-Fi technology (uses 60 GHz spectrum instead of the 5 GHz used by 802.11ac).

Windows

Furthermore, the company is also working to bring out Windows “Future” that will offer wireless universal docking facility (any Windows device will seamlessly integrate and work with other Windows device). Microsoft will be immensely benefited as the demand for the docking station is expected to grow in a big manner in the coming years.

Microsoft has also entered into a partnership (Project Evo) with Intel to develop devices with advanced security, Cortana, artificial intelligence, and gaming facilities. Furthermore, a partnership agreement was signed with Qualcomm Technologies inc., to enable Windows 10 on mobile computing devices powered by Snapdragon processors. The transition of the company from being a software seller to cloud computing service provider propelled the company to growth track last year. In the next three years, public cloud spending is expected to touch a high of $205 billion annually, from the current $58 billion. Nearly $129 billion is expected to be spent on SaaS (Software as a Service) services. Microsoft’s Azure cloud platform, which is second only to Amazon in cloud computing, is expected to gain a major share of the market.

Considering the future growth, Brent Bracelin, an analyst at Pacific Crest has given an “Overweight” rating for the stock with a target price of $70. Likewise, Heather Bellini, an analyst at Goldman Sachs has recently raised the price target to $68, from $60 given earlier. Based on the above facts, we anticipate the stock to climb new heights in the short-term.

The price chart shows consolidation of the stock near 62 levels. The stochastic oscillator is also emerging out of the bearish zone. This reflects the probability of another rally in the stock.

Microsoft Stock Price: January 10th 2017

Microsoft Stock Price: January 10th 2017

A binary trader can invest in a high or above contract to gain from the forecasted uptrend in the price. The investment can be made if the stock trades below $63.50. The trader should also choose an expiry date between 17th and 19th of January.


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