MSFT Stock: If Microsoft Can Pull This Off, Shares Could Skyrocket

MSFT StockWhat’s Ahead for MSFT Stock?

Microsoft Corporation (NASDAQ:MSFT) isn’t the company it once was and I mean that in the best way possible. Analysts still picture a dusty old firm, struggling to keep up with the modern world, which is probably why MSFT stock is trading so low.

Don’t get me wrong; it’s not like most observers are bearish on Microsoft stock. Out of 21 analysts, 14 are positioned as a “Strong Buy on MSFT. But even they are only glimpsing the tectonic shifts happening beneath the surface.

They see growth happening at the margin.

These analysts appreciate Microsoft for its existing strengths, like “Windows” and “Office,” while adding a slight premium for the successful “Surface” series. The Surface is the first device that truly merges the benefits of a tablet and laptop, making it difficult to classify.

It’s been a tremendous boon to the company, but there’s so much more that Microsoft has to offer. CEO Satya Nadella has been making changes that could profoundly influence the firm’s value, meaning that we could see MSFT stock explode in 2016.

Here’s why…

Bringing Innovation to Life

What Microsoft lacked was not really innovation, but the ability to bring that innovation to market. The company was perceived as a clunky old bureaucracy that tended to make bad decisions.

Take the smartphone fiasco. After spending $7.2 billion acquiring Nokia’s smartphone division, Microsoft unveiled a series of Windows phones. They were supposed to be a new plank in the firm’s business, a competitor to the “iPhone” and “Android”-powered phones. (Source: “Did Microsoft just give up on Windows Phone?The Verge, July 8, 2015.)

But really, they were simply a disaster. Microsoft’s programming language was so abstruse that developers steered clear, making the platform a desert for popular apps. They didn’t even have Snapchat or Instagram.

Last year, Microsoft finally decided to scrap the entire smartphone endeavor.

Obviously, a writedown that large is bound to shake confidence in the company, but most of that was under ex-CEO Steve Ballmer, not the company’s current CEO, Satya Nadella. Under Ballmer, the research and engineering teams rarely crossed paths.

This was done on purpose to help scientists innovate without a corporate taskmaster standing over their shoulder. However, it had terrible consequences on Microsoft’s ability to commercialize a great idea or discovery. Nadella realized that.

So he scrapped the smartphone business and started reorienting the company to bring researchers and engineers together. He moved 1,000 people from the research department to a new branch of Microsoft called “MSR NExT.”

MSR NExT is supposed to be a place where ideas can rapidly escalate to full-fledged products. This facet could prove invaluable to Microsoft in the coming years.

MSFT Stock Outlook

With the Windows phones, it felt like Microsoft was imitating, rather than innovating.

There were still a lot of smart researches in the company that were making breakthroughs, but their work simply wasn’t making it to market. Restructuring the firm will hopefully force the best ideas to reach the…ahem, surface (I can’t resist a bad pun).

Think about a cloud-based version of Microsoft Office or Microsoft’s “HoloLens” headgear, which beings virtual reality into everyday life. These innovations could be enormously profitable, but it will take the overlap of scientists and engineers to make it happen.

Nadella sees that and I think it could be his legacy. Considering his subtle changes in the firm’s structure, I think the market is seriously undervaluing MSFT stock.