Microsoft Gets New Street-High Price Target, Analyst Sees Transformational Cloud Story In Redmond

Microsoft Corporation MSFT is a huge beneficiary of the secular trend of enterprises increasingly shifting workloads to the cloud in the work-from-home environment, according to Wedbush.

The Microsoft Analyst: Daniel Ives maintained an Outperform rating on Microsoft shares and increased the price target from $220 to a Street-high $260. The stock is on Wedbus's best ideas list.   

The Microsoft Thesis: As enterprises accelerate their digital transformation and cloud strategy with Microsoft by six to 12 months, the prospects of a heavy remote workforce for the foreseeable future now looks in the cards with the COVID-19 backdrop, Ives said in a Thursday note. (See his track record here.)

Azure's cloud momentum is still in its early days of playing out within the company's massive installed base, the analyst said, adding that the Office 365 transition for both the consumer and enterprise segments will provide growth tailwinds in the coming years. 

About 85%-90% of the cloud deployments have already been green lighted by CIOs, with a very low risk of any major push outs for the June quarter, the analyst said.

Microsoft is the core cloud name to play this transformational secular trend, Ives said. 

The Azure/Office 365 product portfolio, according to the analyst, is holding up extremely well during the pandemic, as reflected by investor optimism that has sent the stock to all-time highs, the analyst said. 

An anticipated economic rebound in the September and December quarters should add further fuel to Microsoft's growth, he said. 

"In a nutshell, Nadella & Co. continue to lead a transformational cloud story narrowing the gap vs. Bezos and AWS into 2021." 

Even after accounting for one or two quarters of deep recessionary impact, Microsoft's cloud franchise has a $1-billion valuation, according to Wedbush. 

MSFT Price Action: At last check, Microsoft shares were down 0.43% at $211.92. 

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