For Microsoft, FBR Expects A Renaissance Of Growth

• Microsoft Corporation MSFT shares are up 17 percent year-to-date, while having traded between $40 and $45 for most of the year.
• FBR & Co’s Daniel Ives maintained an Outperform rating on the company.
• While Microsoft upcoming shareholders meeting may not surprise, the company could indicate a more aggressive M&A strategy, Ives said.

Microsoft is scheduled to host its annual shareholders meeting in Bellevue, WA on December 2. “While we are not expecting any major fireworks to come out of the event, we believe a number of topics (e.g., M&A strategy, capital allocation, etc.) will be covered during the day,” analyst Daniel Ives wrote.

Microsoft’s shares have risen about 17 percent YTD, versus an 8 percent gain in the NASDAQ. The company’s stock performance indicates that CEO Nadella's cloud/mobile strategy is being appreciated by customers and partners globally, “given the success around secularly important products (e.g., Azure/Office 365),” Ives mentioned.

The analyst expects the meeting to include something about potential M&A going forward. Microsoft could undertake “a much more aggressive” M&A strategy around cloud in 2016. This would be an attempted to fill in the gaps to further boost the company’s flagship Windows 10 platform, which would be critical to growth prospects in 2016 and beyond.

“In a nutshell, it has been a great year for Nadella/Microsoft, and we believe the stage is set for a "renaissance of growth" to return to Redmond, with a focus on strong secular areas (e.g., cloud) putting fuel in the growth engine,” Ives commented.

The analyst believes that Microsoft is “best positioned as the vendor to compete with AWS on the enterprise cloud front for years to come.”