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Why Microsoft’s Market Capitalization Could Hit $1 Trillion

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Feb. 1 2018, Updated 10:34 a.m. ET

Could Microsoft hit $1 trillion market cap by 2019?

Earlier in this series, we looked at the role of Microsoft’s (MSFT) cloud offerings and AI (artificial intelligence), which have made the market and industry analysts bullish on MSFT stock. The upbeat results expected from Microsoft in fiscal 2Q18 are further fueling the stock.

Richard Davis, an analyst with Canaccord Genuity, wrote that it is reasonable to expect Microsoft’s stock to rise 10%–20% on an annual basis over the next five years. He wrote, “If you believe, as we do, that it is reasonable to expect MSFT to appreciate between 10-20% annually for the next five years, you get to the Big T as early as calendar Q4 2019, or more like sometime in early 2020.”

That growth positions Microsoft to possibly be the first trillion-dollar enterprise software stock.

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Products and segments contributing to Microsoft’s growth

Microsoft’s Office 365 product suite is expected to form a larger percentage of the company’s total revenue in the future. Microsoft’s dominance in the CRM (customer relationship management) space and its Dynamics 365 presence in the enterprise software market further add to its appeal.

Dynamics 365 is an Azure-hosted product that combines ERP (enterprise resource planning) and CRM offerings. In fiscal 1Q18, 4Q17, and 3Q17, Dynamics 365 reported growth of 69%, 74%, and 81%, respectively.

Following the strategic acquisition of LinkedIn, Microsoft linked Dynamics 365 with LinkedIn tools, which could further enhance Microsoft’s stance in the enterprise space. Earlier in this series, we looked at the growing market share for Azure compared to Amazon’s (AMZN) AWS (Amazon Web Services) and Google’s (GOOG) Google Cloud Platform.

Collectively, these offerings could ensure Microsoft’s better-than-expected fiscal 2Q18 results.

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