Microsoft (MSFT) provides software, cloud, and other computing services worldwide. I am bullish on the stock.
Back in the old days, Bill Gates and Microsoft were emblems of the future of operating systems.
Windows is still a popular operating system, but today, Satya Nadella is Microsoft’s chairman and CEO.
Moreover, Microsoft is evolving into a cloud company, slowly but surely. It’s a necessary move as computer software has evolved quickly.
As we’ll see, MSFT stock reflects Microsoft’s continued growth and evolution. (See Analysts’ Top Stocks on TipRanks)
A Quick Look at MSFT Stock
2021 has been a terrific year for Microsoft’s shareholders, to say the least.
The stock has been unstoppable, even despite the global microchip shortage that’s been going on.
Perhaps nothing can stop MSFT stock, as it just recently printed a 52-week and all-time high of $336.58.
That’s amazing when we consider that the stock started off 2021 at $218.
It’s a good thing that MSFT stock has moved to the upside, as it’s not much of a dividend payer, with a forward annual yield of just 0.7%.
Still, that’s just the icing on the cake for Microsoft’s loyal shareholders.
Really, share-price appreciation is the key to generating returns in MSFT stock. Given the current momentum and trajectory, $400 should be an easy target in the near future.
A Time of Transition
Microsoft is undergoing a number of changes. We already alluded to Nadella becoming the face of the company, as well as Microsoft’s move into the cloud.
The broader economy, and the technology sector in particular, are also going through changes.
For one thing, the COVID-19 pandemic has accelerated cloud adoption. Also, businesses and consumers have had to adjust to rising inflation as well as a microchip shortage.
Nadella actually envisions Microsoft as a company that can help businesses navigate their way through these changes.
“Digital technology is a deflationary force in an inflationary economy. Businesses – small and large – can improve productivity and the affordability of their products and services by building tech intensity,” Nadella recently explained.
Of course, Nadella emphasized that his company is glad to help today’s business adapt to a cloud-centric tech landscape in the 2020s.
“The Microsoft Cloud delivers the end-to-end platforms and tools organizations need to navigate this time of transition and change,” Nadella clarified.
Revenues from the Cloud
Of course, Nadella’s words wouldn’t mean much to investors if Microsoft wasn’t able to make money from its Cloud segment.
There’s no need to worry about that, as Microsoft Cloud generated a healthy $20.7 billion in revenue during 2021’s third quarter.
That figure represents a 36% increase on a year-over-year basis.
Truly, the data demonstrates that Microsoft’s transition into a cloud business has been highly successful.
Revenue in Intelligent Cloud was $17 billion and increased 31% (up 29% in constant currency), with the following business highlights:
For example, Microsoft’s server products and cloud services revenue increased by 35%.
This, in turn, was driven by Azure and other cloud services revenue growth of 50%.
Sure, there are other cloud businesses out there, but they’re not all posting numbers like these.
Wall Street’s Take
According to TipRanks’ analyst rating consensus, MSFT is a Strong Buy, based on 22 Buys and one Hold. The average Microsoft price target is $369.36, implying 10% upside potential.
As the world’s businesses change, Microsoft is undergoing changes as well.
Yet, change isn’t necessarily a bad thing. Microsoft is evolving in the right direction, and the financial data proves this.
So, don’t worry about Microsoft’s transition into the cloud.
It has only helped MSFT stock to go higher, and the momentum isn’t likely to stop anytime soon.
Disclosure: At the time of publication, David Moadel did not have a position in any of the securities mentioned in this article.
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