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Fast Money 360: Microsoft

Thursday, 27 Jan 2011 | 1:43 PM ET

With Microsoft scheduled to report quarterly results after Thursday's closing bell, how should you game its stock into and in the wake of earnings?

Seems like a good time for the "Fast Money 360."

Find out what fundamentals, technicals and insights from the options world all suggest lie ahead for this stock .

FUNDAMENTALS

Robin Mesch of Robin Mesch Associates is neutral to bullish on MSFT.

"Microsoft is smack dab in the middle of value here with much more of an upside bias," Mesch said. “It could go three percent up or three percent down from current levels, but it's more constructive where it is right now."

Mesch recommends a a hold strategy on Microsoft unless it starts to break $26.75, which she said would "change the picture."

TECHNICALS

After looking at the charts, Collin Gillis of BGC Financial is a buyer of Microsoft. The tech giant, he said, is "getting its mojo back."

“Their core products, Windows 7 and Office 2010, are hitting records. Windows 7 is the fastest operating system in history ... we’re selling about 7 copies every single second," Gillis said. “On the consumer side, they are actually having some great successes.”

OPTIONS

From the options market, Cantor Fitzgerald's Mike Khouw thinks recent options activity bodes well for MSFT.

"A lot of put activity in Microsoft actually over the last couple of days," Khouw said. "Investors who have ridden the rally — up 20 percent since the beginning of last year — are asking themselves, 'Does this mean the party is over?'

"Well, not so fast actually. This is a stock that usually moves about 4.7 percent on earnings, but options prices are suggesting that it might not move that much this time. What that tells us is that maybe some of that put activity is actually sellers."

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In other words, options traders seem to think that the stock is fairly priced here and if anything, it might drift a little higher. Khouw himself is a buyer of MSFT.

What's the Trade?

Joe Terranova, chief market strategist at Virtus Investment Partners, thinks MSFT has the potential to outperform. Should the tech giant report a good quarter and create a little excitement, he thinks hedge funds are going to have to chase it higher.

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Trader disclosure: On Jan. 27, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Jon Najarian owns (F), is short (F) calls. Jon Najarian owns (FRO), is short (FRO) calls. Jon Najarian owns (GS), is short (GS) calls. Jon Najarian owns (GM), is short (GM) calls. Jon Najarian owns (WMT), is short (WMT) calls. Jon Najarian owns (VZ), is short (VZ) calls. Jon Najarian owns (SNDK), is short (SNDK) calls. Jon Najarian owns (SLE) puts. Jon Najarian owns (GDX) puts. Jon Najarian owns (AMZN) call spreads. Guy Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE) and (BTU). Steve Grasso owns (ASTM), (BA), (BAC), (BWC), (C), (CSCO), (JPM), (LIT), (LPX), (MHY), (NDAQ), (PFE), (PRST) and (S). Joe Terranova Owns (VRTS), (C), (UPL), Terranova Owns (GM), (PEP), (TLT), (MS), (POT), (AAPL), (ARUN), (LTD), (PVH), (CVI), (CVE), (CPX), (CNQ), (FCX). Joe Terranova is short Gold.

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GUY ADAMI
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STEVE GRASSO
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JOE TERRANOVA
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
Virtus Investment Partners Owns More Than 1% Of (ABAX)
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ANTHONY SCARAMUCCI
Scaramucci has no disclosures

HEATH TERRY
Terry has no disclosures on (NFLX)

MIKE KHOUW
Cantor Fitzgerald & Co is a market maker in (AMZN)
Cantor Fitzgerald & Co is a market maker in (F)

COLIN GILLIS
BGC Financial LP and/or its affiliates, expect to receive, or intend to seek, compensation for investment banking services within the next three months from (MSFT)
No disclosures on (AMZN)

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