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Yahoo
22 minutes ago
- Yahoo
Analysts Keep Raising Microsoft Stock Price Targets - Time to Buy?
Sell-side stock analysts continue to raise their price targets on Microsoft Corp (MSFT) stock. One way to play this is to sell short out-of-the-money (OTM) MSFT puts. They provide a short-put yield of over 1.3% one month out for a 4% lower strike price. MSFT is trading at $492.50, just off its recent peak of $497.45 on June 26. It could have much further to go, based on our free cash flow (FCF) based price target and analysts' recent recommendations. Is Apple Stock 'Dead Money' in July 2025? Watch This AAPL Options Indicator Now. BAC Earnings Play: Profiting from Volatility with a Naked Put Analysts Keep Raising Microsoft Stock Price Targets - Time to Buy? Get exclusive insights with the FREE Barchart Brief newsletter. Subscribe now for quick, incisive midday market analysis you won't find anywhere else. My June 10 Barchart article ("Microsoft Stock is Up In the Last Month - Is MSFT Still a Buy? ") showed how MSFT could be worth $581.71 per share. That is still 18% over today's price, but at the time it was almost 24% than the price at the time of the article ($469.69). This price target was based on Microsoft's strong free cash flow (FCF) and FCF margins. However, there is reason to upgrade our price target, as analysts have done. For example, using a 29% FCF margin (the same as its latest quarter) and analysts' next 12-month (NTM) revenue average of $298 million, we forecast $86.42 billion in FCF. Then, using a 2.0% FCF yield (i.e., the same as a 50x FCF multiple), we forecast a market cap of over $4.32 trillion: $86.42b FCF x 50 = $4,321b market cap. However, it now makes sense to look one full year out to the fiscal year ending June 30, 2026, using revenue forecasts for the period. For example, Seeking Alpha shows that 57 analysts now project FY 2026 revenue (for the year ending June 30, 2026) will be $316.49 billion. That means our new FCF estimate, using a 29% FCF margin, is higher at almost $92 billion for FY 2026: 29% x $316.49 billion = $91.78 billion FCF That raises our market cap estimate, using a 2.0% FCF yield (i.e., a 50x multiple): 50 x $91.78 billion = $4,589 billion (i.e., almost $4.6 trillion) market cap Today's market cap, according to Yahoo! Finance, is $3,655 billion. As a result, MSFT's value could rise by +25.6% from here over the next year: $4,589 b/ $3,655b = 1.2555 -1 = +25.55% That means MSFT stock is worth 25.55% more, or $618 per share: $492.50 x 1.2555 = $618.09 new price target That is +6.2% from my prior price target. Moreover, since then, analysts have significantly raised their price targets. For example, Yahoo! Finance now shows that 60 analysts now have a $522.26 average price target. That is up from $512.04 as of June 10. In addition, Barchart's average survey price target is $522.81, up from $515.74 on June 10. So, on average, analysts have raised their price targets about +1.65% in the last 3 weeks. Moreover, which tracks recent analysts' stock price recommendations, shows that 37 analysts have an average price target of $556.11. That is +4.78% higher than the June 10 price target average of $530.74. This shows that analysts agree with my FCF-based analysis: MSFT is still deeply undervalued. However, there is no guarantee this will occur. The stock could fall from its peak. One way to play this is to set a lower buy-in target by shorting out-of-the-money (OTM) put options. This also provides existing shareholders with extra income. In my last Barchart article, I suggested selling short the $450 strike price put option that expires on July 18. This was slightly over 4% below the trading price of $469.36. The investor received $4.10 in midpoint premium, representing a yield of almost 1% (i.e., $4.10 / $450.00 = 0.00911 = 0.91%. However, now those puts have fallen in price to just 53 cents at the midpoint. So, most of the $4.10 premium has already been earned by the short-seller. It might make sense for a trader to cover this trade (i.e., enter an order to 'Buy to Close'), and roll it over into a new short-put trade. For example, the Aug. 8 MSFT put expiration period shows that the $470.00 strike put has a premium of $6.80 per put option contract shorted. That is slightly over 4% below today's price. So, the short-put yield is higher than before (for new investors), almost 1.5%: $6.80/$470 = 0.01447 = 1.447% (38 days to expiry) Moreover, for investors who rollover the prior trade, the new yield is still high: $(6.80 - $-0.53)/$470.00 = $6.27 / $470 = 0.1334 = 1.334% The point is that this is even higher than the original short-put yield, even though MSFT stock has risen. So, in total, the rollover trade provides a total yield of 1.334% and 0.91%, or 2.244% over the period from June 10 to July 18 (i.e., 38 days). In addition, less risk-averse investors can short the $475.00 put for $8.05, for a net gross yield of 1.69% (i.e., $8.05/$475.00), and a net (post-rollover) yield of 1.583% (i.e., $7.52/$475.00). That is just over the next 38 days, so the annualized expected return is very high. The result of these plays is that investors using a mix of these trades to make a 1.5% short-put yield over the next month. Moreover, the breakeven point is lower for an investor buying into MSFT if the account is assigned to buy at $470. For example, the breakeven buy-in point (if MSFT falls to $470 over the next month) is: $470 - $6.80 = $463.20, or 6.16% below today's price That provides huge upside, over one-third higher, given our $618.09 price target: $618.09/$463.20 = 1.334 = +33.4% upside The bottom line is that MSFT looks very cheap here. Our new FCF-based price target, as well as analysts' upgrades, shows it is at least 20% to 25% undervalued. So, it makes sense for new investors in MSFT to set a lower buy-in price target by shorting OTM puts. Existing shareholders can make extra income shorting these OTM puts as well. On the date of publication, Mark R. Hake, CFA did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on
Yahoo
23 minutes ago
- Yahoo
Deere (DE) Surpasses Market Returns: Some Facts Worth Knowing
Deere (DE) closed the most recent trading day at $520.31, moving +2.35% from the previous trading session. The stock outperformed the S&P 500, which registered a daily gain of 0.48%. Meanwhile, the Dow experienced a drop of 0.02%, and the technology-dominated Nasdaq saw an increase of 0.94%. The agricultural equipment manufacturer's shares have seen a decrease of 0.93% over the last month, not keeping up with the Industrial Products sector's gain of 6.87% and the S&P 500's gain of 5.13%. The upcoming earnings release of Deere will be of great interest to investors. The company's earnings per share (EPS) are projected to be $4.6, reflecting a 26.87% decrease from the same quarter last year. Alongside, our most recent consensus estimate is anticipating revenue of $10.21 billion, indicating a 10.32% downward movement from the same quarter last year. In terms of the entire fiscal year, the Zacks Consensus Estimates predict earnings of $18.82 per share and a revenue of $38.05 billion, indicating changes of -26.54% and -14.99%, respectively, from the former year. Investors should also take note of any recent adjustments to analyst estimates for Deere. Such recent modifications usually signify the changing landscape of near-term business trends. As a result, upbeat changes in estimates indicate analysts' favorable outlook on the business health and profitability. Research indicates that these estimate revisions are directly correlated with near-term share price momentum. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model. The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. The Zacks Consensus EPS estimate has moved 0.02% higher within the past month. Deere currently has a Zacks Rank of #3 (Hold). In the context of valuation, Deere is at present trading with a Forward P/E ratio of 27.01. This valuation marks a premium compared to its industry average Forward P/E of 21.62. Also, we should mention that DE has a PEG ratio of 3.23. The PEG ratio bears resemblance to the frequently used P/E ratio, but this parameter also includes the company's expected earnings growth trajectory. By the end of yesterday's trading, the Manufacturing - Farm Equipment industry had an average PEG ratio of 3.23. The Manufacturing - Farm Equipment industry is part of the Industrial Products sector. This industry currently has a Zacks Industry Rank of 171, which puts it in the bottom 31% of all 250+ industries. The Zacks Industry Rank is ordered from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1. Remember to apply to follow these and more stock-moving metrics during the upcoming trading sessions. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Deere & Company (DE) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research
Yahoo
23 minutes ago
- Yahoo
It's not just Tesla — Rivian's deliveries were down last quarter, too
Rivian Automotive reported its 2025 second-quarter production and delivery results. Rivian produced 5,979 vehicles and delivered 10,661 vehicles this quarter, a year-over-year decline from Q2 2024. Tesla's deliveries also dropped in Q2, just missing analysts' expectations. It's not just Tesla. Rivian Automotive's Q2 deliveries were also down. The company shared its production and delivery results on Wednesday. It delivered 10,661 vehicles in the quarter ending on June 30. That's a noticeable drop compared to the same time last year, when Rivian delivered 13,790 vehicles. Reuters reported a 22% decline. Its stock dipped on Wednesday and closed down 4.45%. The company shared that it produced 5,979 vehicles at its Illinois-based manufacturing facility during the last quarter. The company produced 9,612 vehicles during the same time in 2024. "Production was limited during the second quarter in preparation for model year 2026 vehicles expected to launch later this month," the company said on Wednesday. "Production and delivery results for the quarter are in line with Rivian's outlook." Rivian said it received a $1 billion equity investment from Volkswagen Group as part of a joint venture between the two companies. Tesla, led by Elon Musk, also shared delivery numbers on Wednesday. The company delivered 384,000 electric vehicles during its second quarter, which missed Wall Street analysts' expectations. It marks the largest quarterly decline in pure numbers in Tesla's history. The electric vehicle industry faces headwinds as it navigates consumers' uncertainty and the fallout from President Donald Trump's tariffs. Tariffs and consumer concerns aren't the only obstacles that could trip up the electric vehicle industry. Trump's domestic tax and spending bill would also affect the clean energy sector. The bill, if passed and signed into law, could end the $7,500 EV tax credit on new leases and electric vehicle sales by the end of September, according to Reuters. Although Rivian didn't qualify for the tax credit, the company relied on a leasing loophole to utilize it. The potential loss of the tax credit could impact companies like Tesla, though. Representatives for Rivian did not respond to a request for comment from Business Insider. Read the original article on Business Insider Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
