Can Microsoft Really Climb 22% to $260?

Microsoft stock was just assigned a $260 price target, implying more than 20% upside. It can get there, but the charts suggest the stock will take some time.
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Shares of Microsoft  (MSFT) - Get Report started off the day strong, up almost 1% on Thursday to new all-time highs. The stock, however, has struggled to hold those gains as selling pressure picks up in the broader markets. 

Helping propel the stock higher was a price target bump from Wedbush. Analyst Dan Ives raised his target to $260 from $220, implying more than 20% upside from Wednesday’s close.

Ives argues that the coronavirus pandemic is driving up demand for remote work, something that is playing into Microsoft’s strengths.

Microsoft's momentum could still be in its early days, he added, while maintaining the stock as a top pick and keeping its overweight rating.

Now the question turns becomes whether Microsoft can climb to $260. While it’s a lofty target — given that Microsoft stock is already up 35% this year and 55% over the past 12 months — it’s also within reason.

Remember, Microsoft's revenue is relatively insulated from the negative impact of Covid-19, at least so far. Perhaps that gives the stock room to run. Let’s look at the charts.

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Trading Microsoft Stock

Daily chart of Microsoft stock.

Daily chart of Microsoft stock.

I like the way Microsoft stock trades up into resistance, fails at it a few times, then eventually powers through.

We saw that price action in mid-2019 too, with $140 acting as resistance throughout the summer. Finally, shares gapped above this mark in October and went on a powerful run until the coronavirus selloff crushed the share price.

In May and June, we saw the February highs between $185 and $190 acting as resistance. Again, Microsoft failed at this level a few times before ultimately breaking out over it and running past $200.

On a bigger pullback, I would love to see Microsoft back at $185 and have it find support near this level. When prior resistance acts as support, it’s a bullish sign for investors.

As for whether Microsoft can get to $260, it’s certainly possible — but it will take time.

To get there, shares will first have to clear the 161.8% extension, up near $225. Above that and the two-times range extension (measured from the March low to the February high) comes into play around $247.

Above that and $260 can be investors next upside target.