Wedbush Raises Target As It Predicts Cloud Services Will Lift Microsoft Above Wall Street Estimates

Microsoft Corporation MSFT likely will beat Wall Street's expectations, and the software giant's cloud computing capabilities around Azure will be a key factor in its success, a Wedbush analyst said on Sunday.

What Happened: Wedbush Analyst Daniel Ives has an outperform rating and a $260 price target on Microsoft. Ives says he has seen strong cloud deal activity around Azure, Microsoft's cloud computing service, during the December quarter, and that another Street beat is likely in the cards for MSFT.

“We are raising our price target from $260 to $270, while establishing a new bull case of $300 vs. our prior $275 target. We maintain our outperform rating,” Ives said in his report. 

Microsoft is expected to report earnings on Tuesday.

Why It Matters: According to Ives, the current work-from environment "is further catalyzing more enterprises to make the strategic cloud shift with Microsoft across the board," leading to brisk growth for Azure.

With vaccines being deployed globally, the work-from-home shift will moderate as many return to the office during 2021, the analyst said.

Even so, his firm says the shift has accelerated the trend of businesses moving their workloads into the cloud by a year. Wedbush estimates that 35% of workloads are in the cloud today, and the number is poised to hit 55% in the next year.

“In a nutshell, Microsoft CEO Satya Nadella and his company continue to lead a transformational cloud story," he wrote, that is narrowing the gap with Amazon.com, Inc. AMZN and its competing cloud offering, Amazon Web Services.

He added that this will also have a ripple effect for well-positioned cybersecurity companies that specialize in cloud security, especially following news of the SolarWinds hack that emerged a month ago.

Trade Action: Microsoft shares closed up 6.05% last week at $225.95.

Photo via Wikimedia Commons.