Microsoft Gains on Analyst Upgrades and Strategic Moves



According to Barron’s, Morgan Stanley’s Keith Weiss predicts Microsoft’s (NASDAQ:MSFT) market value could exceed $1 trillion. Yesterday, the analyst maintained his “overweight” rating on the stock and raised his price estimate to $189 from $157. The revised price target implies an 18% upside for the stock.

Weiss is particularly optimistic about Microsoft Azure and the Office 365 subscription service. He said, “Strong positioning for ramping public cloud adoption, large distribution channels and installed customer base, and improve margins support a path well beyond $1 trillion market cap for Microsoft,” noted Investor Place, citing Barron’s. The analyst also foresees wider margins and “durable double-digit gross profit growth” through fiscal 2022 on the back of the Commercial Cloud business.

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Wedbush’s Daniel Ives also raises price target

Today, Wedbush analyst Daniel Ives also boosted his price estimate for Microsoft, to $195 from $185, reported StreetInsider. He reiterated its “outperform” rating on the back of “stronger-than-expected” Azure deal flow. The bull-case valuation for Microsoft, according to Wedbush, is $210.

In December, Ives also showed optimism for Microsoft Azure, noted Barron’s. “He reported that customers he has talked to over the past month see ‘a clear acceleration of larger and more strategic enterprise cloud deals as Redmond is poised to win the majority of the next phase of cloud deployments vs. the likes of Amazon and [Amazon CEO Jeff] Bezos,’” according to Barron’s.

LinkedIn could add more joys for Microsoft

Another piece of good news for Microsoft is expected growth in its LinkedIn user base. On January 7, eMarketer forecast that in 2020, the US adult user base for LinkedIn would be 62.1 million. The market research company also expects the user base to grow 4.2% to 64.7 million in the next year. By 2023, LinkedIn could have 68.8 million users, predicted eMarketer. It also expects LinkedIn’s ad revenue to rise to $1.59 billion in 2020 and $1.77 billion in 2021. Most of this revenue is likely to come from B2B advertisements, according to eMarketer. In fiscal 2019, LinkedIn achieved $6.75 billion in revenue. It seems Microsoft’s $26 billion acquisition of LinkedIn in 2016 is slowly paying off.

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Meanwhile, according to Business Insider, three years after its acquisition, LinkedIn is likely to shift to the Microsoft Azure cloud in 2020. LinkedIn CTO and VP of engineering Raghu Hiremagalur told Business Insider, “moving to the cloud gives it more opportunities to take advantage of future technologies.” He added that Azure’s presence in data centers worldwide “will help LinkedIn better serve customers around the world.”

On Tuesday, a Goldman Sachs survey revealed that most large organizations prefer Microsoft Azure over AWS Amazon Web Services). The results signal that Microsoft is growing at a rapid pace and could overtake AWS as the cloud leader.

Microsoft gearing for the top spot

Microsoft Azure is also making big moves in Canada. Today, the company announced the most significant expansion of its cloud computing infrastructure in the country since 2016. As a part of this move, Microsoft will provide Azure availability zones in central Canada. The company aims to increase its compute capacity by over 1,300%. Microsoft is planning a similar move in eastern Canada as well.

According to OnMSFT, Microsoft plans to include new tools in its Office applications for retail customers. OnMSFT also indicated that the company announced the launch of its Dynamics 365 Commerce Software today. With this software, retailers can manage their in-store operations, inventory, and e-commerce offerings. By taking more retail clients under its wings, Microsoft aims to get the edge over Amazon (NASDAQ:AMZN) and Slack (NYSE:WORK).

Microsoft closed 1.25% higher to close at $162.09. MSFT stock surged more than 56% last year. Given the company’s aggressive strategies for Azure and other software offerings, its stock could see another bull run this year. Microsoft is set to release its fiscal 2020 Q2 results at the end of January. We’ll be keeping tabs on its moves. Stay tuned.


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