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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