Microsoft
(NASDAQ: MSFT) is the odds-on favorite to be the first company to cross the $2
trillion market cap threshold according to Wells Fargo Securities analyst
Philip Winslow, citing strong growth in Microsoft’s Azure cloud computing business.
He believes that the stock price will grow 55% from current levels, pushing the
company’s market cap to that rarified level.
“We believe the COVID-19 pandemic has created a zeitgeist
moment for [cloud computing] as a whole — changing [chief information
officers’] cloud strategies forever … from which we expect Microsoft Azure to
disproportionately benefit as the enterprise cloud,” Winslow wrote in a
note to clients.”
Microsoft
stock has climbed more than 15% in 2020 as the company has avoided much impact
from Covid-19. Yet Wells Fargo argues that the shares have more room to run—and
that the tech giant’s market capitalization could grow to more than $2 trillion
on the strength of its Azure cloud-computing business.
Analyst
Philip Winslow reiterated an Outperform rating on Microsoft Tuesday while
boosting his target for the stock price to $250 from $205, based on the
strength of the company’s cloud offerings.
The
pandemic “has created a Zeitgeist moment for the cloud as a whole,” as the last
holdouts with a ‘no-cloud’ strategy have finally been forced to embrace the
movement, he wrote in a research note, saying he expects “Microsoft Azure to
disproportionately benefit as the ‘enterprise cloud.’”
While
Amazon.com’s (AMZN) Amazon Web Services is still the biggest cloud provider,
Winslow believes that Microsoft is narrowing the gap, while pulling farther
ahead of the No. 3 player, Alphabet’s (GOOGL) Google Cloud. While investors
have already clearly recognized the potential for Microsoft and piled into the
shares, “the full multi-year impact of Azure’s growth potential is still not
properly reflected in consensus estimates or the stock’s valuation,” he said.
Winslow
said that this is too conservative. His research shows that “Azure has grown
and continues to grow at faster rates than all of its closest hyperscale
competitors,” including Amazon, Alphabet, and Alibaba Group Holding (BABA).
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