Wedbush Expects Microsoft Azure's Strong Momentum To Continue

Microsoft Corporation MSFT is scheduled to report its fourth-quarter earnings for fiscal 2020 after the closing bell on Wednesday.

Field checks indicate strong cloud deal activity and Azure could record 55% year-on-year growth in the June quarter, according to Wedbush.

The Microsoft Analyst: Daniel Ives maintained an Outperform rating on Microsoft, with a price target of $260.

The Microsoft Thesis: With a strong possibility of the current work-from-home environment extending for the foreseeable future, many companies have been forced to accelerate their digital transformation and cloud strategy with Microsoft by six to 12 months, Ives said in the note.

The analyst believes Azure's cloud momentum is “still in its early days of playing out,” given Microsoft’s massive installed base. He expects the transition to Office 365 transition by both consumers and enterprises to provide growth tailwinds over the next few years.

Although an economic recession could impact cloud deployments, this will remain the highest priority for IT divisions of companies, Ives said. He added that 85%-90% of these cloud deployments had already been approved by top management, with budgets in place.

The analyst said economic recovery in the September and December quarters “should put further fuel in MSFT's growth engine.”

MSFT Price Action: Shares of Microsoft had risen 2.7% to $208.35 at the time of publication.

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