RBC Still Bullish On Microsoft, Says It's Now Worth $54/Share

In a report published Thursday, RBC Capital Markets analysts maintained an Outperform rating on

, while raising the price target from $50 to $54. The report came after the company's financial analyst meeting. "We came away from the Financial Analyst Meeting with a stronger appreciation for the Windows 10 strategy, Office as a Platform and the unique position of Azure," the analysts mentioned. Going forward, Windows 10 is expected to provide Microsoft with new revenue opportunities. Apart from this, new Windows App Store and new subscription offerings also have the potential to boost the company's sleeper revenue generation opportunities. Microsoft issued a guidance of flat Opex in FY16 vs FY15. "Given FY15 Opex should come in $2B below the initial guide ($0.5B due to underlying core reductions) this is a good starting point," the analysts stated. The analysts believe that "Microsoft is the mega cap name in software where conviction in long-term success continues to improve." The company's commercial cloud positioning remains strong. "Microsoft guided Commercial cloud revenue to be $20B ARR by 2018 which we think is well ahead of Street estimates. Microsoft acknowledged that Commercial Cloud GMs are estimated to be 44% in FY15 vs. 15% in FY14. We calculate that in F3Q15, incremental Commercial Cloud GMs were ~85%. In other words, this will be a rapidly growing, profitable business," the report mentioned.