Harm Diaconescu's  Instablog

Harm Diaconescu
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Self-taught value investor and options trader for 5 years, with experience primarily in the technology, software and mobility space.
  • This Month In Microsoft: A Summary of News And Events 0 comments
    Jul 7, 2011 1:35 PM | about stocks: MSFT

    News about Microsoft's (NASDAQ:MSFT) latest moves continue to emerge at break-neck speed.

    First, we've been hearing about Microsoft's latest profit center: Android. As outlined in my latest article on the enormously fluid mobility space, Microsoft is hedging its bets effectively and extracting additional revenue from this growing sector even though it commands a paltry marketshare.

    Secondly, Google+ star Mark Zuckerberg announced the newest "awesome" Facebook feature: integrated Skype chat. Although not very well-reviewed, preliminary investor sentiment seems positive and Microsoft may stand to benefit from continued partnership with the social networking king of the hill.

    Thirdly, we have the much maligned Steve Ballmer confirmed as keynote speaker for the Superbowl of technology PR, the 2012 CES. Rumors point to a fairly detailed preview of Windows 8, especially the radically new dual interface, which allows users to switch between traditional Windows GUI and a smart-phone inspired, tile-oriented interface.

    With these developments and a successful Office 365 launch in tow, the stock has picked up momentum and posted a solid week through the July 4th weekend and beyond:

    Data and graph courtesy of Google Finance

    MSFT has nearly doubled the NASDAQ and close to quadrupled the technology sector index. From a technical standpoint, the situation looks even more encouraging: the equity is now trading significantly above 200 and 50-day SMAs:

    Data and graph courtesy of StockCharts.com

    MACD flashed an average buy signal at its lowest point in mid-June, with a positive deviation from the EMA line which has gotten stronger and stronger on average volume, a sign there's a dearth of sellers. The MACD line now sits at 0.477, with a positive 0.243 deviation.

    In short, the Microsoft bus seems to be leaving the station, and investors would be well-advised to get on board. Based on historical valuation range of 12-13.5 forward P/E, I have a $31-$33 price target on MSFT, in line with the mean price target from the gaggle of analysts following the equity, at $32.70.

    Disclosure: I am long MSFT.
    Stocks: MSFT
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