Microsoft Stock: Growing Beyond All Expectations

Posted On December 14, 2017 1:34 pm

Microsoft stock is in the news today after investment firm Evercore ISI predicted in a report that the Redmond company could reach $1 trillion market cap by 2020. The firm also increased its price target for Microsoft stock to $106 from $93. Evercore is extremely bullish on Microsoft’s Office business. The firm said in its report that Microsoft is expanding its software market swiftly by offering easy-to-use productivity apps and software for general users.

In September, Microsoft announced Office 365 F1, a suite of apps for frontline workers who don’t usually use software and apps. Evercore’s analysts also expect Microsoft’s Office 365 commercial business to generate $26.86 billion in revenue in fiscal 2021. The report says that Microsoft Office will win “incremental share” in the coming years due to its higher penetration and productivity. Evercore expects that Microsoft Office 365 revenue will touch $5.18 billion.

Microsoft stock’s overall position is looking spectacular. Shares have gained about 37% since the start of this year. Revenue in the first quarter of 2018 jumped by 12% and crushed analysts’ forecast by a whopping $1 billion.

Microsoft is also catching up with competitors like Amazon and Google in the smart home and virtual assistance market. Recently, car and home automation company Harman Kardon launched a new smart home speaker called Invoke. The speaker is powered by Microsoft’s smart assistant Cortana.  According to an estimate, the smart home market’s total worth is expected to reach $137 billion by 2023. Microsoft cannot reach the level of penetration enjoyed by Amazon Echo and Google Home, but small contracts with major companies will help the company add a new, sustainable revenue stream.

Microsoft is already giving a tough competition to Amazon in the Cloud industry. In the most recent quarter, Microsoft cloud ARR (annualized run rate) exceeded $20 billion. Cloud revenue of Microsoft is increasing at a healthy pace. Microsoft is increasing its investments in its Azure Cloud domain.

Investment firm UBS analyst Jennifer Swanson Lowe recently said in a report that cloud-computing services division of Microsoft will add about $57 billion in revenue over the next five years. In the fiscal first quarter of 2018, Microsoft commercial cloud revenue increased by $5 billion, a 56% year-over-year jump. The Cloud growth is also giving a boost to the company’s margins. Margins in the first quarter increased by 8 percentage points, to 57%. Microsoft now has 11% of the public cloud computing market.

 Related: Here’s Why You Should Steer Clear of Snapchat. 

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