Microsoft Price Target Raised by Morgan Stanley (MSFT) – Investopedia
Microsoft (MSFT) shares are poised to surge in the years ahead as the stock market is currently undervaluing the potential of the company’s cloud computing platform and the shrewd management of the rest of its portfolio of assets, according to Morgan Stanley analyst Keith Weiss.
In a note sent to clients covered by CNBC, Weiss claimed that the stock, which has already risen 14 percent this year to $70.87, should be worth at least $80. This optimism is driven by his belief that Microsoft’s market leading status in the latest hot trends in tech will lead to a surge in revenues and see the company’s 2018 fiscal earnings come in higher than his Wall Street peers are currently predicting.
“Top line drivers include the Azure (Microsoft emerging as a public cloud winner), data center (share gains and positive pricing trends), and O365 [Office 365] (base growth and per user pricing lift),” Weiss said in the note.
Weiss claims that the growing popularity of Azure, Microsoft’s cloud computing platform, will play a key role in triggering fiscal 2018 earnings per share of $3.45, a forecast that comfortably surpasses the Wall Street consensus of $3.32. He also cited artificial intelligence and the increasing monetization of Microsoft’s online Office 365 software as key drivers of profit growth in the year ahead, together with the launch of new consumer-focused technologies including the latest Xbox console and Surface laptop. (See also: Microsoft Exec Says Apple Is ‘Following’ Surface With the iPad Pro.)
Looking further ahead, Weiss is confident that Microsoft will be able to maintain “durable double-digit EPS growth,” due to its market-leading status and the untapped potential of its cloud business. Weiss reckons that rising interest in artificial intelligence will fuel demand for Azure, to the point that it could eventually add $110 billion to Microsoft’s valuation — the company’s market capitalization is currently $548 billion. (See also: Microsoft Could Surpass Amazon in Cloud Computing This Year.)
“With a strengthening secular positioning and rationalization of underperforming portions of the solution portfolio, Microsoft is back to showing durable double-digit EPS growth — and investors should be willing to pay a higher multiple for that growth,” he added.