2021 has so far seen another stellar performance from Microsoft (MSFT). The stock has been on an almost constant steady uptick, culminating in year-to-date gains of 26% – far exceeding the 16% returns accumulated by the S&P 500.
Heading into next week’s June quarter (FQ4) earnings, Wedbush’s Daniel Ives thinks Microsoft investors will have plenty more to smile about.
“We expect another ‘beat and raise’ special from Redmond with Azure growth numbers (45% + YoY) that exceed whisper expectations and headline numbers that comfortably exceed the Street’s $44 billion and $1.90 estimate,” the 5-star analyst opined. “Our June quarter checks for Microsoft upticked again as the Azure cloud growth story is hitting its next gear of growth in Redmond.”
Ives’ bullish outlook for Microsoft centers mostly around the ongoing cloud opportunity, one which is contrary to “the Street’s view of moderating cloud growth on the other side of this 16 month WFH cycle.”
That is because of the amount of “deal activity” MSFT is seeing in the field, according to Ives’ industry checks.
In fact, transition to the cloud remains a top priority for many businesses and heading into FY22, the analyst believes Microsoft is still “only ~35% through penetrating its unparalleled installed base on the cloud transition.”
And this transition is worth a lot of money. Ives says the digital transformation “represents a $1 Trillion TAM (total addressable market),” and is one that is still in the early stages of playing out across the globe.
Of course, Microsoft is up against stiff competition, from Google Cloud, IBM and most of all from AWS, but Ives thinks it is Microsoft that is best positioned to “gain more market share vs. AWS in this cloud arms race.”
Unsurprisingly, then, Ives reiterated an Outperform (i.e., Buy) rating on MSFT shares, backed by a $325 price target. The implication for investors? Upside of 12%. (To watch Ives’ track record, click here)
Ives may think the Street is underestimating Microsoft’s cloud opportunity, but no analysts are betting against the tech giant’s success. The stock has a full house of Buys – 25, in total – naturally resulting in a Strong Buy consensus rating. The average price target is a bit more subdued, however; at $307.57, the figure represents upside of ~6% on the one-year time frame. (See MSFT stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
