Wedbush Analyzes Microsoft Amid Coronavirus Uncertainties

Microsoft Corporation MSFT is a strong tech stock to own, for those willing to navigate the high market volatility caused by the coronavirus outbreak, according to Wedbush.

The Microsoft Analyst

Daniel Ives maintained an Outperform rating for Microsoft with a price target of $210.

The Microsoft Thesis

Microsoft’s shares have been under heavy pressure amid the widespread sell-off across the board on worries of the coronavirus resulting in an economic slowdown, Ives said in the note.

An economic slowdown could negatively impact enterprise spending and Microsoft has withdrawn its March guidance.

The analyst pointed out, however, that most of Microsoft’s revenue and valuation are based on its flagship Azure, Office 365, and core enterprise driven franchise.

Microsoft’s non-PC business is expected to grow in the low-to mid-teens over the coming years on the heels of its cloud business. Ives said that more than 90% of this revenue is “essential/high priority” for enterprises.

So, even if a softer economic environment results in a 10% hit to the cloud and enterprise growth drivers, “we are still looking at what we value as a $900 billion to $1 trillion valuation cloud franchise off our FY21 revenue/EPS targets,” the analyst wrote.

While markets could continue to be volatile, Microsoft “remains the best way to play the transformational cloud shift for the coming years,” Ives said.

MSFT Price Action

Shares of Microsoft were up 4.83% to $157.89 at time of publication.

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