Shares of legacy tech titan Microsoft Corp. (MSFT) have spiked 5.6% on Monday morning on a bullish note from a team of analysts on the Street who expect the stock to surge more than 40% in 12 months, thanks to widescale adoption of its cloud platform.
Azure to Double in the Next Three Years as Public Cloud Market is Expected to Reach Over $250 Billion
In a note to clients on Monday, analysts at Morgan Stanley forecasted shares of the Redmond, Wash.-based information technology behemoth to reach $130 in 12 months, as the company heads off against Amazon.com Inc. (AMZN) and Apple Inc. (AAPL) to be the first to reach the $1 trillion milestone. At a market capitalization of $743 billion, Microsoft trails Apple at $913 billion and Amazon at $764 billion. Last week, the Seattle-based e-commerce company surpassed search engine giant Alphabet Inc. (GOOG) in terms of market value, as the Mountain View, Calif.-based company's market cap stands at $705 billion.
"Strong positioning for ramping public cloud adoption, large distribution channels and installed customer base, and improving margins support a path to $50 billion in EBIT and a $1 trillion market cap for MSFT," wrote Morgan Stanley's Keith Weiss.
Morgan Stanley is upbeat regarding Microsoft's ability to compete against Amazon Web Services and Google Cloud as it doubles down on the public cloud market, expected to more than double in size to reach over $250 billion. Weiss highlighted Microsoft's opportunity to use its existing assets, such as a large customer base and distribution channel, to steal customers away from its competitors over the next three years. During that time, the analysts expect public cloud adoption to surge from 21% of workloads currently to 44%.
Weiss applauded other top line drivers for MSFT alongside its Azure cloud platform such as data center, which should benefit from market share gains and positive pricing trends, along with Office 365, set to post growth for its user base and per user pricing. The integration of LinkedIn, which the company bought for $26.2 billion in 2016, should also work to push top-line growth back above 10%, wrote the analyst.
Trading at $91.90, MSFT stock reflects an 7.3% increase year-to-date (YTD) versus the S&P 500's 2.3% decline and the Nasdaq Composite Index's 2.1% gain over the same period.