Thanks in large part to its booming cloud computing business, Microsoft Corp.’s (MSFT) market capitalization could hit $1 trillion during the course of the next twelve months if Morgan Stanley’s new prediction proves true.
The Wall Street firm says the Redmond, Washington-based software giant’s stock may reach $130 in the next twelve months, giving it a market cap of around $1 trillion, according to Marketwatch. At $130 a share, Morgan Stanley is predicting the stock could gain 35%. So far in 2018 shares are up more than 11%. As of Thursday’s market close, its market capitalization stood at $738.98 billion. (See more: Microsoft Could Make a Big Cloud Buy: BMO.)
Cloud Business Booming
“Revenue drivers including Azure (Microsoft emerging as a public cloud winner), data center (share gains and positive pricing trends), Office 365 (base growth and per user pricing lift) and the integration of LinkedIn should drive durable double-digit revenue growth over the next three years,” Morgan Stanley wrote in a research note to clients covered by MarketWatch. “With double-digit revenue growth, improving gross margins, continued [operational expenditure] discipline and strong capital return, we see a durable teens total return profile.” The Wall Street firm noted that the company’s return on equity could be near a bottom and thus may move up. Morgan Stanley has an overweight rating on Microsoft.
No Public Company Is In The $1Trillion Club Yet
As is stands, none of the publicly traded companies in the U.S. has yet to hit the $1 trillion in market capitalization although Apple (AAPL ) and Amazon.com (AMZN ) could get there before Microsoft. Currently, Apple’s market capitalization stands at $919.9 billion while Amazon’s is at $767.5 billion.
Morgan Stanley isn’t the only Wall Street firm that is upbeat about Microsoft’s prospects in the cloud computing market. After all, it had a strong showing in the first quarter and just landed a contract with the nation’s spy agencies. Analysts have been pounding the table on the stock since its quarterly earnings report with JPMorgan saying late last month that Microsoft could post more earnings surprises for 2018. (See more: Microsoft Poised For More Earnings Surprises This Year.)
For the first three months of the year, the software company weighed in with fiscal third-quarter results that surpassed Wall Street views. It reported that revenue in Microsoft Intelligent Cloud business, which includes Azure, came in at $7.9 billion, up 17%, with Azure seeing sales growth of 93% and server products and cloud services revenue increased by 20%. Microsoft enterprise services revenue was up 8% year-over-year in the quarter.