Microsoft flying high on wings of Cloud business

Over the last few years Microsoft (MSFT) has dramatically changed direction as a company to generate new sources of revenue and in doing so altered consumer perception of the brand and impressed a number of Wall Street analysts who are eagerly awaiting the company’s quarterly earnings report (October 26) which they hope will confirm their selection as their top large cap pick.

                         

As the above chart indicates that the recent rally to $78 has carried Microsoft stock into a technically overbought situation. The last similar signal was in June ahead of a pullback from $72 to $68 that occurred in roughly a week. Microsoft shares tend to trade lower ahead of their earnings as traders look to lock-in profits on gains ahead of the volatility caused by the company’s earnings report.

Under CEO Satya Nadella the company is now well-placed to enjoy a period of sustained growth with growing revenue derived from its Cloud offering (which is well on target to reach the $20 billion annually predicted by Nadella by 2018) and increased revenues from new ventures as well as revitalization of revenue from its existing portfolio of products.

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