New Price Target for Microsoft After Michael Saylor, Bitcoin Rejection
It may be time to buy into the tech giant as the board rejects a crypto treasury idea and Big Tech gets a political boost.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
The news broke overnight. Microsoft MSFT shareholders had rejected a proposal by Michael Saylor of MicroStrategy MSTR fame and the National Center for Public Policy Research. The idea was to at least explore the diversification of the firm's balance sheet with Bitcoin. According to the proxy statement for the Microsoft shareholder meeting, the proposal for exploring the investment in Bitcoin stated, "At minimum, companies should evaluate the benefits of holding some, even just 1% of its assets in Bitcoin."
The firm's board of directors had recommended the rejection, pointing toward the volatility of cryptocurrencies in general and what kind of impact that could have on the firm's balance sheet. Saylor, for his part, as a known advocate for Bitcoin who has continually borrowed to add Bitcoin to his firm's holdings, advised Microsoft not to miss "the next technology wave." Just an FYI, in my opinion, while not necessarily being anti-crypto, the next technology wave is generative AI and the one after that is quantum computing. The blockchain is no longer cutting-edge technology. MicroStrategy holds 423,650 Bitcoin valued at $41.45 billion, which is about 2% of all Bitcoin. The National Center for Public Policy, thought of as a conservative think tank, has also made such a proposal to the Amazon AMZN board.
This Morning
Wedbush Securities released a note indicating the analytical team's sentiment that incoming President Trump's selection of Andrew Ferguson to lead the Federal Trade Commission as a replacement for Lina Khan, who is thought of as anti-big tech, is like a Christmas gift to those firms. The analyst behind the note is the well-known Dan Ives, who has regained his five-star rating at TipRanks after going through a rough patch earlier this year.
Ives wrote, "In essence, Christmas came early for the tech world as the Khan overhang is removed for the tech world at a key time in the AI arms race in which we expect the strong to get stronger as Mag 7 gets the engines started up again on M&A with Microsoft, Oracle ORCL, Alphabet GOOGL, Amazon, and Tesla TSLA set to accelerate deals to expand their technology moat."
Ives then added that Ferguson is viewed as being "pro-innovation" and stated flatly, "The DOJ investigations remain and will be a battle against tech in the courts but let's be clear, today is a great day for the tech world and Silicon Valley with Khan finally gone from the FTC."
Can Microsoft Get Back on Track?
Year to date, about 49 weeks into the year, the S&P 500 is up about 27.5%. The Nasdaq 100 has done even better and is up 28.7%. I don't like to complain about a stock that is up 19% year to date, but Microsoft, which over the years has been great to me, has been a weight upon both of those indices. For years, Microsoft had been the top holding in my most active portfolio. I was a big believer in Satya Nadella. I still am, but admittedly, Microsoft has fallen to where it is now my sixth-largest long position partially due to the outperformance of several other names and partially because I had reduced my allocation toward the name.
Readers will recall that this past July, MSFT hit some turbulence and broke down below the lower trendline of a regression model that had held trend for more than a year and a half. The stock then threw up a "double bottom" pattern that did not go anywhere. Let's zoom in:
Readers will now see that MSFT, over the past three months or so, has put together a basing period of consolidation. On Wednesday morning, the stock is trying to break out of that flat base as Relative Strength flirts with retaking the 70 level and the daily MACD has now postured itself quite bullishly. Within that indicator, the 12-day EMA has moved above the 26-day EMA and the histogram of the nine-day EMA has moved above zero. The stock also stands at the precipice of a "golden" crossover of the 50-day SMA over the 200-day SMA.
My Thoughts
I think it may be time to either get back into MSFT if one has been out, or increase the allocation if one, like me, was not out but had put the stock on the back burner. The whole ball of wax, for right now, depends on the stock holding the pivot created by the flat base.
Target Price: $512
Pivot: $446
Add: Down to 21-day EMA
Panic: Loss of 200-day SMA.
At the time of publication, Guilfoyle was long MSFT and AMZN equity.
