Microsoft Corp (MSFT) stock looks attractive to short-put MSFT investors. They can set a lower buy-in point and also collect income while waiting by shorting out-of-the-money put options. I wrote about this play in two recent Barchart articles and want to update investors.
MSFT closed just below $500 at $495.40 on Friday, Aug. 14. MSFT jumped significantly after its July 29 FY26 earnings release. I discussed in reasons why this happenned in two Barchart articles, on July 31 and Aug. 3.
Stop Missing Market Moves: Get the FREE Barchart Brief – your midday dose of stock movers, trending sectors, and actionable trade ideas, delivered right to your inbox. The short version is that Microsoft is generating strong free cash flow (FCF) and is likely to continue doing this despite heavy capex spending. Moreover, since I wrote these articles, analysts have upped their revenue forecasts and MSFT price targets.
As a result, it makes even more sense to find ways to buy into MSFT stock. One way to do this is to sell short near-term out-of-the-money (OTM) put options. Analysts have been jacking up their revenue forecasts.
For example, revenue for the year ending June 30, 2027 is now $391.17 billion and $468.37 billion by June 2028. These are 17.9% and 41.2% higher than the $331.8 billion in FY 26 revenue (ending June 30, 2026). They are also higher than prior estimates (as seen in my July 31 Barchart article)s and imply that FCF could jump significantly.
For example, in Q4 the company generated operating cash flow (OCF) that was 61.6% of revenue. It also expects its ongoing capex to be $175 billion. So, OCF could reach $241 billion (i.e., 61.6% x $391b) and after deducting $175 billion capex, FCF would be $69 billion.
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