What Investors Should Be Excited About Regarding Microsoft (MSFT)By Ryan Adsit
Barclays was sounding very optimistic this morning in their note on Microsoft Corporation (NASDAQ: MSFT), as analyst Raimo Lenschow reiterated their Overweight rating, with a $65 price target. The PT is an upside of 10.45% from the current share price of $58.85, with the stock currently trading just above its 50-day SMA of $58.16 after a skid of nearly 3% in three days, thanks to the market fluctuations following Trump win.
The analyst was pleased with Microsoft’s latest developments; such as executing well with its cloud transition, with Azure fast becoming a trusted and secure cloud service that integrates with the broadest operating systems. Also, the upcoming new features in Windows Server 2016 and SQL Server 2016 is expected to encourage hybrid cloud, which would further benefit Azure. The gross margin is also expected to expand, thanks to the strong growth rate anticipated for Azure.
As to competition from Google, a positive revenue growth was already reported in the broader Office segment and a smooth sailing is anticipated for Office 365. Despite the increase in cloud investment, the capital returns remained high and the company anticipates earnings to approach $3 this year. Lenschow believes that Microsoft’s broad-based pricing power and capital structure flexibility makes it a compelling stock.
According to latest reports, Microsoft signed a 237-MW wind energy deal distributed over two agreements, 178-megawatt from Bloom Wind project in Kansas as well as 59-megawatt from Happy Jack and Silver Sage wind projects. With these agreements, MSFT’s total investment in wind energy projects in the U.S. has reached more than 500 megawatts.
Meanwhile, investors are keenly watching out for the possible rollout of Trump’s Tax Plan. If the rollout happens, it would be hugely beneficial for MSFT, as it would not only mean a one-time dividend amnesty but also a decrease in the business tax rate from 35% to 15%. This could mean a potential 21% return for dividend shareholders of MSFT within a year. But for now, it is a waiting game.
Microsoft has an overall consensus rating of Moderate Buy among analysts issuing ratings on the stock in the past three months, based on TipRanks.com. The average analyst price target is $64.00, which is an upside of 8.75% from the last close price.