Microsoft Valuation at 24x FY26 Fuels 7.9% Yield via $290 Put
Microsoft shares rose 10% over three days to about $412, their strongest short-term rally in six years, yet remain 15% below this year’s high. Valuation sits at 24x FY26 earnings versus a five-year average of 30x, driving interest in March 2027 $290 puts for a 7.9% yield and 32% discount.
1. Three-Day Surge
Microsoft shares climbed approximately 10% over a three-day span, marking the stock’s strongest short-term advance since 2020 and closing near $412, though it remains about 15% below its highest level reached earlier this year.
2. Valuation Compression
The recent pullback has reduced Microsoft’s forward multiple to roughly 24x projected FY26 earnings, a notable decrease from its five-year average of 30x, highlighting an attractive entry point for value-oriented investors.
3. Put-Option Strategy
Market participants are evaluating the sale of March 19, 2027 $290 strike puts, which trade at a premium yielding about 7.9% annualized, offering a potential effective purchase price near $279.66 if exercised, representing a 32% discount to current levels.
4. AI and Cloud Growth Drivers
Microsoft’s Azure cloud business expanded revenue by 39% year-over-year last quarter, supported by a 66% surge in capital expenditures on data centers and GPUs, while free cash flow exceeded $77 billion with operating cash flow margins above 53%.