Why Atlantic Equities Rated Microsoft as ‘Overweight’



Microsoft’s success in the cloud gets it an “overweight” rating

Earlier, we discussed how the acquisition of Flipgrid would likely boost Microsoft’s (MSFT) position in the education space as well as its position against Google (GOOG) in the space.

Recently, citing recent research by Atlantic Equities, CNBC reported that Microsoft had received an “overweight” rating from the research company.

It is Microsoft’s increasingly improving position in the consolidated and competitive cloud space owing to Azure and Office 365 that has fueled Atlantic Equities’ optimism in the company. Microsoft continues to be the number two player in the overall cloud space globally as well as geographically, except for in the Asia-Pacific region, where Alibaba (BABA) has taken the second position owing to its dominance in China. Amazon (AMZN) continues to be the undisputed leader in the cloud space. IBM (IBM), Google, and Alibaba complete the top five list.

The above presentation from RightScale’s 2018 State of the Cloud Report shows that Microsoft Azure has grown to reach 70% US adoption. In the fiscal third quarter, Microsoft’s Azure and Office 365 reported growths of 93% and 42%, respectively.

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Azure and Office 365 are enhancing Microsoft’s revenue base

James Cordwell, an analyst with Atlantic Equities, said, “Azure has replaced Windows as the platform underpinning Microsoft’s enterprise offering, and we forecast it exceeding $100 billion revenue over the next decade.” He added, “With Office 365, Microsoft has already established a strong position in the software as a service market and there remains robust growth potential as the greater accessibility of the cloud delivery model continues to drive expansion in the user base and customers steadily upgrade from basic packages.”

Cordwell has assigned a price target of $125 on Microsoft stock, which closed at ~$98.4 on June 25, indicating a ~27% potential upside in the stock’s price.


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