Breaking News

Analysts Are Bullish On Microsoft. Should You Be Too?

By (Haris Anwer/ MarketsMar 29, 2018 04:56
Analysts Are Bullish On Microsoft. Should You Be Too?
By (Haris Anwer/   |  Mar 29, 2018 04:56
Saved. See Saved Items.
This article has already been saved in your Saved Items

There's a lot of excitement about Microsoft (NASDAQ:MSFT) right now. Analysts at Morgan Stanley) see this legacy technology giant becoming the first $1 trillion-dollar firm in the U.S. in the next 12 months. While raising their one-year price target by 50% to $130 a share, these analysts are also quite bullish on Microsoft’s future prospects.

MSFT Weekly 2015-2018
MSFT Weekly 2015-2018

Touching a trillion dollars in market cap will be a huge and of course very positive reversal in the fortunes of the Redmond, Washington-based company which mostly underperformed during the past decade. It missed the action by focusing too much on its Windows operating system and the other traditional software it develops, most of which had a bleak future.

However, judging by the growth momentum on which it’s currently riding now, it seems Microsoft has found its second wind. It's in the middle of another long-term boom that may take its share price back to the peak it reached just before the 2000 tech bubble burst.

Cloud Computing Success

What investors are loving about Microsoft is that the company’s turnaround strategy has begun to pay off. At the same time, its CEO, Satya Nadella, firmly remains in charge of the company’s destiny. He's delivered $20 billion in sales—way ahead of schedule—from its flagship cloud division; commercial sales jumped 56% in the first-quarter of 2018, followed by a 14% gain in the company’s Intelligent Cloud business year-over-year.

In a note to clients this week, Morgan Stanley's Keith Weiss wrote:

"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."

Cloud computing, to put it simply, is the delivery of computing services—servers, storage, databases, networking, software, analytics and more—over the Internet which in this particular business is dubbed the “cloud.” Companies offering these services are called cloud providers and typically charge sometimes significant fees for cloud computing services based on usage, similar to the way homeowners are billed for gas or electricity consumption.

The stakes in the fast growing cloud business are too high for tech behemoths not to be involved. According to an estimate by Gartner Inc., the continually expanding market for public cloud computing will be worth $411 billion two years from now. Competition is fierce in this niche of the market. Microsoft is emerging as a winner, currently ranked number 2, with Amazon (NASDAQ:AMZN) in the lead position.

Linkedin Bet Paying Off

Microsoft's acquisition of LinkedIn, a business oriented social networking site with more than 530 million professionals, which MSFT purchased for $26 billion in 2016 in one of the biggest technology acquisitions in history, has also started to pay off. In the second quarter of 2017, LinkedIn contributed $1.3 billion to Microsoft’s $28.92 billion total revenue. That's the highest total revenue for Microsoft since the acquisition closed in December 2016.

LinkedIn's contribution to Microsoft's bottom line comes via three business divisions. The biggest, called "talent solutions," helps recruiters attract and find employees. The site also makes money from advertising and offers paid subscriptions for online courses and premium access on its network.

These gains, along with strong growth in Office 365 subscriptions, have led investors to push Microsoft’s share price higher by 37% over the past 12 months, outpacing gains for that period at rivals Google (NASDAQ:GOOGL) and Apple (NASDAQ:AAPL).

The Bottom Line

If you're a long-term investor Microsoft stock has unique appeal. It’s a perfect retirement stock that also offers huge growth potential. Microsoft began paying quarterly dividends in 2004 and has raised its payout every year since then, from its initial quarterly dividend rate of $0.08 per share to today’s $0.42 per share.

Microsoft has a solid track record of returning capital to investors in the form of dividends and share buybacks and CEO Nadella has also positioned the company for long-term growth. If you’re looking for a technology name to buy and hold, then Microsoft is the company you can count on, especially when the company is doing so many things right.

Analysts Are Bullish On Microsoft. Should You Be Too?
Analysts Are Bullish On Microsoft. Should You Be Too?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email