Microsoft Corporation (NASDAQ:MSFT) has already become a staple in many people’s lives, but investors of MSFT stock are not looking for past glory or current success; they want growth. Luckily, Microsoft does have something up its sleeve.
MSFT Stock: Cloud Business Booming
So, how can Microsoft find growth when its “Windows” operating system and “Office” productivity software are already ubiquitous? Well, thanks the company’s CEO, Satya Nadella, Microsoft is moving quite well into cloud computing.
Prior to his role as Microsoft’s CEO, Nadella was executive vice president of the company’s cloud and enterprise group, one of the company’s fastest-growing and most profitable business streams. After becoming CEO, Nadella has been pursuing a “mobile first, cloud first” strategy.
The smart thing Microsoft did was pursue a mix of on-premise, private could, and public cloud services called “Intelligent Cloud.” You see, corporations have used on-premise solutions for too long, so it’s unlikely that they would go directly from on-premise deployments to cloud ones. By offering a hybrid cloud approach, Microsoft is able to expand its cloud computing services in the enterprise world by helping corporations gradually make a shift to cloud solutions.
The company’s efforts are already showing promising results, with the highlight being “Azure,” the company’s enterprise-grade cloud computing platform first launched in February 2010. In the most recent quarter, both revenue and usage of Azure more than doubled year-over-year. Moreover, Microsoft’s “Enterprise Mobility” customers more than doubled year-over-year to over 20,000, with its installed base growing almost six-fold. (Source: “Earnings Release FY16 Q1,” Microsoft Corporation, October 22, 2015.)
MSFT Stock: Analyst Bullish on Microsoft in 2016
Many analysts have jumped on the bullish bandwagon for MSFT stock. Morgan Stanley (NYSE:MS) just upgraded Microsoft from “Equal Weight” to “Overweight” and raised its price target from $57.00 to $66.00, more than 28% higher than the current MSFT stock price. (Source: “Years in the Making, Microsoft Upgraded to Overweight at Morgan Stanley,” StreetInsider.com, January 13, 2016.)
Keith Weiss, analyst at Morgan Stanley, pointed out that the trendline for earnings-per-share (EPS) growth at Microsoft is about to inflect upwards. He said that the company is entering calendar year 2016 with three things: real top-line drivers, improving margins, and strong capital return. Also, the risk coming from personal computing, such as Windows OEM and Nokia, has decreased substantially.
BMO Capital Markets has also become bullish on Microsoft. BMO analyst Keith Bachman initiated coverage of MSFT stock with an “Outperform” rating and a price target of $64.00. Bachman is optimistic about Microsoft’s enterprise business: “We believe Microsoft can leverage its solid portfolio of enterprise products, including Windows Server, SQL Server, Power BI and Dynamics to gain share in enterprise accounts.” (Source: “Microsoft Stock Poised for yet Another Winning Year,” Barron’s, January 8, 2016.)
The Bottom Line on MSFT Stock
Sure, Microsoft hasn’t been as hot as the FANG stocks—Facebook, Inc. (NASDAQ:FB), Amazon.com, Inc. (NASDAQ:AMZN), Netflix, Inc. (NASDAQ:NFLX), and Alphabet Inc (NASDAQ:GOOG)—but it also doesn’t crash as hard when the market tanks like it is right now.
On Wednesday, January 13, the Dow closed down 365 points, while the NASDAQ dropped 3.41%. And the FANG stocks? Well, Facebook dropped 3.95%, Amazon was down 5.84%, Netflix tanked 8.59%, and Google slipped 3.51%. How’s Microsoft doing? Well, it is in the red, but at a more moderate 2.16%.
In a stock market filled with uncertainty, a company like MSFT stock could offer value, growth, and stability.