In the last six trading sessions, the stock has had a nearly 7% gain, overcoming a recent flat period.
There are a number of positives propelling the stock: analysts' upgrades on Microsoft's cloud progress, its continuing business transformation and a solid fiscal first-quarter report card. There is also a lot of goodwill on Wall Street for Microsoft, thanks to its massive share buyback plan.
Shares soared to record highs after the software giant reported fiscal first-quarter earnings and revenue that surpassed analysts' estimates. Chief Executive Satya Nadella's strategy to invest generously in data center development and engineer partnerships to boost sales for Microsoft's corporate cloud products, Azure and Office 365, has paid handsome rewards.
Revenue from Azure cloud services more than doubled in the fiscal first quarter. Cloud computing has been a lifesaver for Microsoft at a time when personal computer demand -- Microsoft's Windows is a PC-anchored product -- has been sluggish.
Microsoft's mobile-phone efforts never really gained momentum, and its plans to get into the market, beginning with buying Nokia's assets, didn't come to fruition. Apple and Samsung Electronics have shown that the mobile-phone market is a vastly different territory, one that Microsoft has yet to conquer.
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This makes cloud computing hugely important for Microsoft, and Azure represents incremental new revenue. Granted, the cloud market is brimming with competition, but Microsoft seems to have found a niche.
Interestingly, Microsoft's cloud chances were considered slim at one point. Salesforce.com and its poor profitability record exemplify the many challenges that companies must overcome in order to profitably sell cloud solutions.
Amazon, on the other hand, has shown via its high-octane Amazon Web Services arm that the cloud can do wonders. But Amazon is valued at 77.82 times its forward price-earnings ratio, while Microsoft's modest valuation at less than 19 times makes it a smarter investment proposition.
Microsoft's gaming segment is another area that has steadily surged. The company reported gaming revenue for the Xbox and PC variants of $1.9 billion in the fiscal first quarter.
Although Sony will soon release its new PlayStation 4, it remains to be seen how Microsoft handles virtual reality for gaming consoles.
Microsoft's stock has also garnered support and acclaim after its share buyback announcement last month. With its board approving up to $40 billion in share repurchases with no expiration date, there is no stopping the stock.
For passive income earners, Microsoft's 2.36% yield and 12 straight years of dividend growth are attractive, particularly given that the company generates billions of dollars in free cash flow every year.
Although it may be a while before Microsoft can catch up to the giants in the industry, the company's new direction and healthy results could finally solidify its independence from the outdated PC sales and licensing business.
Microsoft isn't a stock that investors should sell based on its cloud prowess and the recurring nature of other revenue. But or continue to hold this stock for the long term.
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The author is an independent contributor who at the time of publication owned none of the stocks mentioned.