Raymond James analysts have maintained their Market Perform rating on Microsoft in a research note to investors on Sunday. On May 8, Microsoft shares closed up 2.25% at $47.75, and year to date, the stock is up by almost 2%.
How are traders making money?
Microsoft stock had a good run in 2014 compared to 2015 up until now. Traders are thus resorting to the option market to earn them profits, says a report from CNBC. Stacey Gilbert, head of derivative strategy at Susquehanna, stated that a majority of option activities are being taken by owners of the stock, who are “overwriting” the shares. This suggests that holders are sitting short on call options against their holding on the stock.
According to Gilbert, there has been an increased interest in the Microsoft July 50 strike calls. If Microsoft stock maintains the level below $50 through mid-July, then the value of the puts will diminish, giving an extra 1.3% yield to traders in the next 10 weeks. On an annualized basis, this return totals to 6.5%, and if we add the 2.6% dividend yield to this, we have more than 9% of Microsoft shares expected to return 9%.
Analysts bullish on Microsoft
A number of analyst firms have assigned ratings to the software giant in recent weeks. Sanford C. Bernstein maintained its Outperform rating on the stock and assigned it a price target of $56 in a research note to investors on Saturday. Analysts at Vetr increased their rating from a Hold to Buy and assigned a price target of $47.97 in a research note to investors on Wednesday. Piper Jaffray set a price target of $53 in a research note to investors on Wednesday,and assigned a Buy rating on the stock. Pacific Crest maintained a Buy rating on the stock and set a price target of $55 in a research note to investors on May 2. Presently, Microsoft has an average rating of Buy and a consensus price target of $48.65.
For the most recent quarter, the results of the company were above the consensus estimates. Microsoft posted earnings per share of 61 cents, above the consensus estimate of 51 cents. Revenue for the company came in at $21.73 billion, above the consensus estimate of $21.14 billion.