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Tuesday, 27 March 2018

Microsoft on Track to Reach $1 Trillion Market Cap in a Year, Says Morgan Stanley Report

Investors have been anticipating the close race to the $1 trillion market cap between Apple and Amazon, but analysts at Morgan Stanley are also counting on Microsoft to hit the mark within a year.

The investment bank hiked its stock price target for Microsoft to $130 from $110 in a detailed report released to clients on Monday. It was 49 percent higher than Friday’s close of around $87 and on track to reach the $1 trillion market value target.

Following the Morgan Stanley report, Microsoft shares rose 5 percent in midday trading on Monday. With a midday market value of $707 billion, Microsoft was right behind Amazon at $733 billion and Apple at $849 billion.

Morgan Stanley’s bullish outlook is attributed to the software company’s growing cloud services under the Office 365 subscription and Azure platform for businesses. Microsoft is expected to grow its share of the cloud market because of its large customer base and distribution channel, unlike cloud giants Amazon and Google. After becoming Microsoft's CEO in 2014, Satya Nadella’s push for cloud computing, instead of making phones, has translated into surging stock prices for the company.

MORGAN STANLEY: This is why Microsoft could become a $1 trillion company in the next year https://t.co/5xP9cRGngK pic.twitter.com/ntrRBvaNXE

— Business Insider (@businessinsider) March 26, 2018

“With Public Cloud adoption expected to grow from 21% of workloads today to 44% in the next three years, Microsoft looks poised to maintain a dominant position in a public cloud market we expect to more than double in size to (more than) $250 billion dollars,” analysts Keith Weiss and Melissa Franchi wrote.

Morgan Stanley analysts cited results from a recent survey of chief information officers that highlighted preference to cloud services versus local servers. Large companies are predicted to channel more of their tech budgets to cloud computing with Microsoft, Amazon, and Cisco in the next few years.

Microsoft still has other business lines, like the Xbox gaming segment and social networking through LinkedIn, that can contribute to its robust growth. However, investors are still betting on Microsoft’s cloud business to primarily drive sales and profit surge of nearly 10 percent in the following years.