Microsoft Is the Surprise Winning Tech Stock This Quarter

By Gunjan Banerji 

One of the hottest tech stocks in the second quarter isn't what you might think.

It's Microsoft Inc., which passed Apple as the most valuable company in the U.S. by market capitalization in April and has held the position since. Its market value topped $1 trillion this quarter and currently sits above that of Amazon, which is worth about $932 billion, according to FactSet data as of Friday.

Microsoft isn't one of the beloved companies in the so-called FAANG group, which investors often turn to for exposure to fast-growing companies and a sector that is rapidly evolving. FAANG stocks include Facebook Inc., Apple Inc., Amazon.com Inc., Netflix, Inc. and Google-parent Alphabet Inc.

But Redmond, Wash.-based Microsoft has been the second-best performer in the Dow Jones Industrial Average in the second quarter. Shares of the software company have surged 13.6% over the past three months as strong earnings and optimism about the future of cloud-computing businesses have lifted it to new highs. Its shares hit a record $137.78 on June 24.

Microsoft's gain topped all the FAANG stocks but one, Facebook, which is up almost 16% as of Friday. To compare, the S&P 500's technology sector rose roughly 6% this quarter, and the broader index has gained 3.8%.

Some investors seem to think this could last. Most analysts tracking Microsoft stock have a bullish outlook on it, FactSet data show. And analysts have recently increased the target share prices for the company, in anticipation of even stronger sales.

Microsoft Chief Executive Satya Nadella has emphasized cloud computing as slowing sales of its Windows operating system led the company to expand to other areas. The company has benefited from a trend among customers of subscribing to applications in the cloud rather than purchasing software licenses.

The tech sector has been the best-performing in the S&P 500 this year but can be prone to dramatic swings, leading major U.S. indexes up but also dragging them lower when investors grow jittery. However, looking outside of the widely-watched tech acronym FAANG would have been a winning strategy this quarter.

Write to Gunjan Banerji at [e-mail]

(END) Dow Jones Newswires

June 28, 2019 17:15 ET (21:15 GMT)

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