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Why Analysts Are Bullish on Microsoft

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Analysts’ recommendations

Microsoft (MSFT) stock is currently trading at ~$105 per share. Out of the 34 analysts covering Microsoft on January 28, 16 analysts have rated the company as a “strong buy,” 16 analysts have rated the company as a “buy,” one analyst rated the company as a “hold,” and one analyst has rated the company as a “strong sell.” The stock doesn’t have any “sell” ratings.

The 12-month consensus target price for the company is $125.7, which is ~20% higher than its last closing price on January 28. Based on its closing price on January 28, the company reported returns of -1.7% in the last week, 3.50% in the last month, 11.9% in the last year, and 4% YTD.

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Reasons for the bullish sentiment

Explaining why Microsoft is a top pick this year, Morgan Stanley (MS) analyst Keith Weiss, said, “Demand behind strategic digitalization efforts should prove durable even in a slowing macro environment, supporting growth for well-positioned software vendors.”

As the above chart shows, Microsoft, along with Amazon (AMZN) and Google (GOOG), is a leading player in the cloud space. According to a Synergy Research report early this month, in 2018, cloud market revenues “passed the $250 billion milestone, having grown by 32% from 2017.” Though the individual market share of players was not divulged in the report, Amazon and Microsoft have been repeatedly featured as the top two players in the cloud (XLK) space.

Azure’s increased adoption, growing focus on the hybrid cloud, and multiyear deals have added to the company’s attractiveness. IBM (IBM) is the leader in the hybrid cloud space. Walgreens Boots Alliance and Albertsons, a privately held supermarket, have chosen Azure as their preferred cloud platform in the last quarter.

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