Microsoft Has Cloud Momentum; Morgan Stanley Tacks On $5 To Price Target
In a report published Wednesday, Morgan Stanley analyst Keith Weiss maintained an Equal-Weight rating on Microsoft Corporation (NASDAQ: MSFT), while raising its price target from $46 to $51.
Analyst Keith Weiss pointed out that Microsoft would be able to sustain its total Commercial revenue growth only if the Commercial Cloud records a CAGR of around 50 percent thru FY18. The company is targeting $20B in Commercial Cloud revenues by FY18. Weiss believes this "could prove conservative."
In the report Morgan Stanley noted, "Our June 2015 CIO survey indicated accelerating Azure adoption, w/ 31% of CIOs using today expanding to 56% in 2 years -an acceleration vs. the prior survey."
Weiss commented that the transition to the cloud was "more than just a shift," as overall spend with Microsoft appeared to be increasing. The June 2015 CIO survey indicated that 57 percent of those using or planning to use O365/Azure expected "a positive impact to overall Microsoft spend."
Weiss added that monetization had "plenty of room to go," and enterprises were estimated to spend $74 per installed business PC on Microsoft technologies, which is significantly lower user than the spend on salesforce.com, inc. (NYSE: CRM) and Adobe Systems Incorporated (NASDAQ: ADBE).
"An expanding user base, broadening set of cloud services and improving monetization all support a more bullish view on the sustainability of Cloud revenue growth. A faster shift towards the Cloud, with improving gross margins, should push multiples higher," the report stated.
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|Oct 2016||William Blair||Upgrades||Market Perform||Outperform|
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