If you talk to a random person and ask them about Amazon (AMZN) , they are likely to cite the website and discuss how Amazon sells everything. Take the same question to an investor and you're likely to hear Amazon Web Services (AWS) mentioned. Amazon's hold on the cloud computer data center market is second to none. Or is it?
It may be surprising to call Microsoft (MSFT) an under-the-radar play when it comes to anything, but Azure Stack is precisely that. While AWS grabs the headlines, Microsoft is quietly gaining steam with Azure Stack, the first hybrid cloud platform with a direct connection to a hyperscale cloud (Azure), which permits developers to write something once, then apply and use it anywhere.
AWS has been a boon for Amazon and there is no reason to think the same idea can't spur the next generation growth for Microsoft. In fact, Microsoft's data center footprint is nearly 3x that of AWS. If Microsoft can translate that footprint to the same revenue per square foot as AWS, it would boost growth by 20 to 25% annually once in place and utilized.
One particular area that holds my interest is workplace communication. Until recently, this was a two-horse race between Slack and Atlassian (TEAM) with Microsoft a somewhat distant, but solid third. Recently, Facebook (FB) has thrown its hat into the ring and may quickly jump Microsoft for that third position.
Ironically, whether it sits in third or fourth, Microsoft may be a safer and better play than the top two and the reason is simple: probability. I would venture either Slack or Atlassian is acquired, which may doom the remaining standalone. Microsoft, with its Microsoft Teams product, could integrate either and do so with a stock purchase not impacting cash, but adding directly to growth.
Microsoft has a captured core clientele given its program runs through Microsoft Office. Expanding beyond Office and integrating Teams into one of the other two offerings would propel Microsoft to the number one position in the fast-growing intra-office communication space. Even if Microsoft chooses not to go the acquisition or partner route, the continued growth of Microsoft Office should maintain a level of growth and consistency as the other three focus upon each other.
While fundamentals are fantastic and tremendous growth opportunities exist, the pesky bearishness of the short-term technical picture, above, stands in the way of the bulls. The stock has formed a clear double-top pattern at $85. Furthermore, there is an open gap to $78 waiting to be filled and the rotation away from tech stocks over the past few weeks seemingly emboldened bears.
Multiple trend and momentum indicators have rolled over bearish and appear to be leading prices lower. I believe this is one where a trader needs to be patient. With the stock around $81, you'd really prefer to forego the next $4 and either buy on a close above $85 or a successful test of $77. The setup favors the bears, so while having to buy at $85 rather than $81 is disappointing, your odds of a successful buy greatly increase.
The weekly picture, above, is mixed. Price appears to be more in a bullish flag/consolidation pattern than showing signs of a top. Again, waiting for a close above $85 is the prudent move. Price is squatting on the 10-week simple moving average (SMA) with additional support at $77, which ties well with the view of the daily trigger points.
Momentum has waned, but the shares have not gone full bear. In fact, a close over $85 immediately targets $90-92 and should be bought. A close below $80 means $77 should be quickly tested, but the stock may not find aggressive buyers until we see $72-74.
Despite my attraction to the fundamental story, I don't see any reason to chase 30% year-to-date gains until MSFT closes over $85 or successful tests $77-78 at a minimum. While below $85, the stock does have potential downside to the $72-74 area based on the weekly chart, so we have about a $2 to $1 risk versus reward when viewing support and resistance.
My view is to let things shake out over the next few weeks and wait on a clearer trigger, so the price action can support the bullish fundamental views.
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