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Microsoft Stock Soars, Key Issues on the Horizon

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Microsoft (NASDAQ:MSFT) stock has soared following its strong earnings results and pandemic-driven demand across its various businesses. Microsoft joins Amazon (NASDAQ:AMZN) and Netflix (NASDAQ:NFLX) among the big tech companies benefiting from the coronavirus outbreak. As a result, investors fleeing the fallout in sectors like travel and hospitality are ending up in stocks like Microsoft right now.

At about $190 per share, Microsoft stock boasts an 18% gain over the past three months and 20% YTD (year-to-date). Netflix and Amazon stocks have gained 35% and 40% YTD, respectively.

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Microsoft stock and good tidings from COVID-19

Microsoft released its March quarter financial results on April 29. The company delivered revenue of $35 billion, which jumped 15% YoY (year-over-year) and beat the consensus estimate at $33.7 billion. Microsoft posted an adjusted EPS of $1.40, which rose from $1.14 a year ago and beat the consensus estimate at $1.26. Notably, the stock has jumped more than 7.0% since the earnings report.

Microsoft’s products and services are in huge demand right now amid the COVID-19 outbreak. For example, Microsoft’s Teams helps people host meetings and collaborate on projects remotely. Services like Teams are in high demand due to social distancing measures and remote work. The surge in demand for remote tools explains why Zoom (NASDAQ:ZM) shares have soared this year.

Also, COVID-19 has boosted the uptake of cloud computing services. So far, Microsoft stock has jumped nearly 30% since it revealed the pandemic-driven boom in its cloud business. The company’s cloud sales rose 59% YoY in the March quarter. With an 18% share of the global market, Microsoft is the world’s second-largest cloud vendor after Amazon.

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Staff protest poses a risk for Microsoft

A staff protest could slow down the momentum in Microsoft stock. A group of Microsoft employees called on the company to end its contracts with police departments. The calls for Microsoft to exit police contracts come amid protests following George Floyd’s controversial death at the hands of police in Minneapolis.

In addition to exiting police contracts, the employees want Microsoft to reduce its weekly workdays and accept a 50% drop in productivity.

We don’t know how much police contracts contribute to Microsoft’s revenue and profit. However, exiting police contracts would result in revenue loss and possibly impact the company’s profits as well. A 50% drop in production could weigh on Microsoft’s financial results and create a headwind for the stock.

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