Microsoft's Tailwinds Outnumber Headwinds, Analyst Says

Microsoft Corporation MSFT boasts four compelling tailwinds that could set the tone for the next decade, according to Piper Sandler.

The Analyst

Brent Bracelin maintains an Overweight rating on Microsoft with a price target lifted from $158 to $190.

The Thesis

2020 will be a "defining year" for Microsoft as it is backed by $67 billion in net cash and investments which can be used to bolster its business through M&A deals, Bracelin wrote in a note. In addition, the company can count on another $200 billion in operating cash flow over the next three years to further "enhance its position as a trusted enabler" of the digital enterprise market.

Specifically, Microsoft could see upside from four catalysts, including acceleration in cloud revenue from 8.5% over the past decade to 12% CAGR over the next three years, growth in developer popularity through recently acquired GitHub and Visual Studio Code and a strong outlook from gaming that will benefit from the first major console refresh in seven years.

On the other hand, Bracelin said investors may want to closely monitor two potential headwinds, including shortages of Intel CPUs which could impact 21% of sales related to Windows and Surface devices, and end of life or support for Windows 7, Server 2008, and SQL.

Microsoft MSFT Stock

Shares of Microsoft were up 0.27% at $166.15 at time of publication Wednesday.

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