Microsoft stock price could reach $250 in 2020 on new government contracts

Written by: Michael Harris
August 22, 2020
  • Microsoft’s JEDI won a contract with the Defense Department, worth up to $10bln over the next ten years
  • The tech giant has apparently attracted attention from other governments worldwide for JEDI program
  • MSFT price printed a fresh record high this week

Shares of Microsoft Corp (NASDAQ: MSFT) hit a fresh record high this week above $217 as the buyers continue to dominate the price action. The latest news from the United States shows that the tech giant may win a new batch of contracts with governments worldwide.

Fundamental analysis: JEDI is a win

The Joint Enterprise Defense Infrastructure, or JEDI, could prove to be much more valuable to Microsoft than initially thought. This cloud-based service, built for the Defense Department with a high focus on security classification levels, has apparently attracted attention from other governments worldwide. 

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“We’ve worked with governments around the world on a longstanding and reliable basis for four decades,” Microsoft’s spokesperson told CNBC.

“We have government customers using our products to enhance their services with the latest in commercial innovations, deeply engage and connect with citizens in powerful ways, and empower government employees with the modern tools they need to be more efficient and effective, and to give them time back to focus on their agency mission.”

The JEDI contract is worth up to $10 billion over the next ten years. Microsoft started exploring other options once Amazon legally challenged the contract that Microsoft got from the Defense Department. 

Amazon Web Service (AWS) challenged the delivery of the contract to Microsoft last year before the court issued a temporary restraining order that blocked the contract from advancing further. 

Amazon argues that Trump’s administration is biased against Amazon and therefore Microsoft was awarded the multi-billion contract. 

“When you have a sitting president who’s willing to be very vocal that they dislike a company and the CEO of that company, it makes it difficult for government agencies, including the DoD to make objective decisions without fear of reprisal. And I think that’s dangerous and risky for our country,” Amazon’s AWS chief Andy Jassy said. 

Technical analysis: MSFT prints a new high

Shares of Microsoft surged higher this week to print a fresh record high above $217. The bulls have managed to breach the 127.2% Fibonacci extension resistance at $206. The price action pulled back to touch this level, now as support, before racing higher to print new record highs. 

Microsoft stock monthly chart (TradingView)

The MSFT buyers are now likely to push the price action higher towards $227 where the next Fibonacci extension sits. In case Microsoft manages to win more multi-billion contracts with its JEDI service, these gains may translate to around 20% in the upside for MSFT stock. 

Summary

Microsoft share price printed a new all-time high this week above $217 as the buyers continue to dominate the price action. While Microsoft’s JEDI contract is legally challenged in the U.S., the tech giant may look to export it globally.