Hi Traders,
I've got two names for you this week, and both come with a loud story attached. Microsoft is carrying most of the AI cloud argument on its back right now. AST SpaceMobile is trying to turn a regular smartphone into a satellite receiver.
Stories like that get people into trades at terrible prices. I use a pitchfork instead (a three-line trend tool that maps where a stock should find buyers and where it should run out of them). Both of these ran into the top of that channel earlier this month.
The two of them handled it very differently, and that's what I'm trading this week.
Check out the breakout in Microsoft (MSFT):
After topping out at the very top of my pitchfork, literally to the penny, MSFT pulled back to the 20-day moving average (the average closing price of the last 20 sessions, which acts as a short-term floor when a stock is trending) and bounced.
It's now trading back into my upper channel. My price target is $506.42, then $513.73. Use a close back below $493.20.
Here's why that bounce held. On July 30, MSFT closed up 15.51 percent on 110 million shares, nearly four times its recent average volume, after the June-quarter numbers landed.
Revenue came in at $90 billion, up 18 percent. Adjusted earnings hit $4.74 a share against the $4.24 Wall Street wanted. Azure grew 43 percent and crossed $100 billion in annual revenue for the first time.
The number that mattered most to me was the backlog. Commercial remaining performance obligations, which is booked business Microsoft hasn't recognized as revenue yet, jumped 84 percent to $678 billion. That's business already under contract.
The stock has run from $349.20 on June 25 to $496.47 on Wednesday, about 42 percent. My $513.73 target is the August 10 high, the exact spot where the pitchfork turned it away the first time.
Microsoft rents out the plumbing corporate America runs on. Office, Teams, Outlook and LinkedIn sit on one side of the house, with roughly 30 million people now paying for Copilot on top of them.
Azure is the other side, renting server capacity to anyone building AI, and that's where the growth is. Windows and Xbox round it out, and that piece actually shrank four percent last quarter. When companies decide what to cut, they cut almost everything before they cut this.
My short this week is AST SpaceMobile (ASTS):
It traded to the top of my pitchfork channel, which lines up nicely with the 50-day moving average, and rolled over. Now it's trading below its most recent lows with RSI and MACD both turning bearish (two momentum gauges that measure whether a stock is gaining or losing steam).
My price target is $52.77. Use a close above $62 as your stop loss.
The August 17 close of $71.14 was the last time this stock finished a day above its 50-day, which sits near $69. Since then it's fallen 5.72 percent on August 18 and another 9.18 percent on August 24, cutting through the August 20 low of $62.89 along the way.
RSI is sitting in the low 40s, so nobody can call this oversold yet. My $52.77 target is three cents under the July 29 low, the last shelf underneath current price.
The fundamentals caught up with the chart on August 10. Second-quarter revenue came in at $31.5 million against the $34.4 million analysts expected, and the loss widened to 77 cents a share from 41 cents a year ago.
Management held full-year guidance at $150 million to $200 million, and Wall Street cut price targets anyway. BofA went to $80 from $95, UBS to $78 from $80, Piper Sandler to $98 from $100, and Deutsche Bank later to $93 from $106.
ASTS wants to be the cell tower nobody has to build. Point your phone at the sky with no dish and no special hardware, and a satellite picks up the signal. They've signed mobile carriers covering close to three billion subscribers, including Verizon, Vodafone and a Rakuten joint venture in Japan.
The technology works and the balance sheet is fine, with $3.7 billion in cash and a $1.3 billion backlog. My problem is the calendar. Trailing revenue is $115 million against a $24 billion market cap, real commercial service doesn't ramp until 2027, and the tape says buyers have stopped paying up for the wait.
So what will the crew choose for the Ticker Highlight pick of the week? Tap this link and pick your subscription rate and get Monday's pick as soon as it hits.
Trade Accordingly…
Licia Leslie