How Microsoft Drove the Dow Higher Today

The Dow Jones Industrial Average hit a new record high today and Microsoft led the way.

Jun 5, 2014 at 3:33PM
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The Dow Jones Industrial Average (DJINDICES:^DJI) touched an all-time high of 16,845 this afternoon, marking the seventh record high this year. The European Union's decision to add more monetary stimulus to the economy and turn deposit rates slightly negative has investors cheering, even if it's really a sign of how bad conditions in Europe are.

Leading the Dow today is Microsoft (NASDAQ:MSFT), which has changed from a Dow dog to an outperformer almost overnight.

MSFT Total Return Price Chart

MSFT Total Return Price data by YCharts.

What's driving Microsoft today
The catalyst for Microsoft today was an analyst note from FBR Capital Markets' Daniel Ives, who said CEO Satya Nadella's plans to shift the company's focus toward mobile and the cloud are going well. He also raised his price target from $43 to $49. 

Msft Windows Start Image

If Microsoft is successful, its tiled operating system will be on low-end mobile devices by year-end.

But the bigger news was that Microsoft expects Windows 8 mobile devices to cost less than $200 by year's end. OEM partners vice president Nick Parker said in a keynote speech at Computex that Windows Phone smartphones will sell for less than $200 this year as Microsoft targets the lower end of the market. Microsoft began offering its operating system free for devices smaller than 9 inches, and it appears manufacturers are starting to take advantage.

More of Microsoft's revenue will come from cloud services and enterprise software as a result of the shift, but it's necessary for Microsoft to gain share and not allow its high-tech rivals to control the world's mobile devices.

It'll be a slow process to gain market share, but Nadella is making progress, and with shares trading at 14 times forward estimates and the stock paying a 2.8% dividend yield, there's good value to be found for investors.

The future of computing is wearables
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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