Can Microsoft Rally to $250 a Share?

Microsoft received a new Wall Street-high price target of $250 from Wells Fargo. Can the technicals justify such a move in the stock? Let's have a look.
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Microsoft  (MSFT) - Get Report rose slightly earlier Tuesday but currently is lower by 0.7%. That’s despite getting a new Wall Street-high price target.

Wells Fargo analysts are quite bullish on the name, raising their price target to $250 a share from $205. They maintained their outperform rating on Microsoft as well.

The new price target represents almost 40% upside to the stock price, but the analysts contend that even larger gains may be in play. They argue that Microsoft should have a $2 trillion market cap in two years.

To get there, free cash flow and steady revenue growth should help drive the share price higher.

The analysts may support a move to $250 (and eventually beyond), but do the charts?

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Trading Microsoft Stock

Daily chart of Microsoft stock.

Daily chart of Microsoft stock.

Microsoft spent the 2019 summer trading up against $140 resistance. In late October, share finally broke out over this mark, gapping up over $140 and continuing its run higher.

In February, investors really stomped on the gas pedal, driving shares from $165 to $190 over the course of a few days. When Microsoft stock pulled back with the rest of the market, $140 did not act as support in the way that many bulls hoped it would.

However, shares hammered out a very nice low at $135, as buyers stepped in at this mark over a six-day stretch in March. While the latest rally has been losing some momentum, it’s good to see Microsoft — and other mega-cap tech stocks — consolidate after such a large move.

The fact that it’s opting to correct through time rather than price — by trading sideways rather correcting lower — builds confidence in the bulls' case.

To get to $250, Microsoft must take out its current high at $190.70. Above that puts $200 in play, a notable psychological level that must be cleared to get to Wells Fargo’s price target.

Above that and Microsoft will need to have the wind at its back. Meaning that, the overall market will likely need to be gaining as well, for it’s unlikely it will go on such a lofty run without broader support.

Over $200 and the 138.2% and 168.2% extensions will be in play at $211.62 and $225.19, respectively. Above that and $247.17 is on the table, which is the two-times extension for the 2020 range and near Wells Fargo's target.