InvestorsObserver Weekly Article

In partnership with InvestorsObserver, we are pleased to provide a new Featured Article every week. Get InvestorsObserver's free report "18 Warning Signs to Know When to Dump a Stock" and read all four articles plus more expert analysis every each week.

The InvestorsObserver articles are provided by Fresh Brewed Media/O2 Media, LLC (“FBM Content”). The FBM Content, including any strategies discussed therein, is provided for general informational and educational purposes only and is not to be construed as investment advice or as an endorsement, recommendation or solicitation to buy or sell securities. In order to simplify the computations, commissions, fees and taxes have not been included in the strategy examples used in the FBM Content. These costs will impact the outcome of all stock and options transactions and must be considered prior to entering into any transactions. Investors should consult their tax advisor about any potential tax consequences. Use of the FBM Content is subject to the Terms and Conditions of the CBOE Website.

Article Archives

Michael Fowlkes' Analyst Insights

Options and ETF Analyst Writer
Michael Fowlkes
Author Bio

October 17, 2016  - Microsoft to Report Fiscal Q1 Numbers October 20

What's Happening

Tech titan Microsoft (MSFT) will report its fiscal first quarter numbers on October 20. The company will report its quarterly results after the market close, with the consensus calling for earnings of $0.68 per share. During the same period last year the company earned $0.57 per share, and the stock is up a modest 3.9% on the year.

Technical Analysis

MSFT was recently trading at $57.65, down $1.05 from its 12-month high and $11.12 above its 12-month low. Technical indicators for MSFT are bullish and the stock is in a weak upward trend. The stock has recent support above $56.30 and recent resistance below $58.40. Of the 24 analysts who cover the stock, 15 rate it a "strong buy", two rate it a "buy”, six rate it a "hold", and one rates it a "sell". The stock receives S&P Capital IQ's 3 STARS "Hold" ranking.

Analyst's Thoughts

Microsoft got a big boost following its last quarterly report, and if the company is able to post another set of strong numbers there is still more upside for the stock. The stock trades with a trailing P/E of 27.3, but a much lower forward P/E of 17.8. As long as the company is able to hit its earnings estimates the stock should build on its recent gains, and with analysts forecasting earnings growth of 3.6% this year, and a much higher 11.4% next year, there is still upside for the tech leader. The consensus calls for earnings of $0.68, but the street expects a much better quarter, with the whisper calling for $0.72. If Microsoft is able to hit the whisper number, shareholders will likely enjoy a nice jump in shares.

Stock Only Trade

If you're looking to establish a long stock position in MSFT, consider buying the stock under $57.75. Sell if it falls below $52.00 or take profits if it gets to $66.50.

Bullish Trade

If you want to set up a bullish hedged trade on MSFT, consider a December 45/50 bull-put credit spread for a 25-cent credit. That's a potential 5.3% return (30.5% annualized*) and the stock would have to fall 12.8% to cause a problem.

Bearish Trade

If you want to take a bearish stance on MSFT at this time, consider a December 62.50/67.50 bear-call credit spread for a 25-cent credit. That's a potential 5.3% return (30.5% annualized*) and the stock would have to rise 8.9% to cause a problem.

Covered Call Trade

If you like the stock, but wish to lower your cost basis on a new position, you may want to consider a January $657.50 covered call. Buy MSFT shares (typically 100 shares, scale as appropriate), while selling the January $57.50 call for a debit of $55.25 per share. The trade has a target assigned return of 4.0%, and a target annualized return of 14.6% (for comparison purposes only).

Articles and other Content