Microsoft's $5B Security Segment Approaches $55B Market Opportunity

Microsoft Corporation MSFT suffered as badly as anyone from the coronavirus (COVID-19) pandemic-related market decline, but it’s since recovered just about all of its stock losses, and one analyst team expects the company to post double-digit top-line growth in the near term.

The Microsoft Analysts

Morgan Stanley analysts Keith Weiss and Josh Baer maintained an Overweight rating on Microsoft with a $198 price target.

The Microsoft Security Thesis

The analysts suspect that Microsoft’s leading security solutions generate more than $5 billion in annual revenues — and they’re still looking at a market opportunity of around $55 billion.

“Security represents another arrow in an expanding quiver of secular growth categories giving us confidence in a durable mid-teens total return profile at MSFT,” Weiss and Baer wrote in a note.

They expect the infrastructure and data that supported the security unit to serve as a foundation for continued innovation and expansion.

“Based on the focus from senior management and strong secular tailwinds behind Security spending, we expect these installed base and data advantages to lead Microsoft into new markets like DevSecOps, IoT Security, and Data Privacy,” they wrote, noting attractive pricing for Microsoft's durability and competitive secular positioning.