Recently, Microsoft Corporation MSFT was upgraded to “Strong Buy” from “Market Perform” by Raymond James' analyst Michael Turits. Also, he gave a price target of $62.00.
Turits is optimistic about the company’s successful transition from PC software to cloud computing.
Cloud computing is a flourishing domain in the technology space. It is a procedure by which data or software is stored outside a computer, but can be easily accessed from anywhere and at any time via the Internet. Cloud computing is gaining traction as it can cut IT costs significantly for companies by removing expensive servers and trimming maintenance staff.
Microsoft's cloud offerings include Windows Azure, Office 365 and Dynamics CRM. With players like Amazon AMZN, which is strongly entrenched, and Alphabet’s GOOGL Google quickly building its position, competition is particularly intense in the space.
According to Turits, Microsoft looks like a "long-term winner" in cloud computing. He sees the company as “the only 'hyperscale' hybrid cloud vendors able to integrate Infrastructure-as-a-Service (IaaS), Platform-as-a-Service (PaaS), and Software-as-a-Service (SaaS) with a vast installed base of on-premise server and client software".
FBR analyst Daniel Ives also rated Microsoft as “Outperform” on strong cloud prospects. He believes that though Amazon Web Services (AWS) is a leader in the cloud space, Microsoft’s Windows Azure has the potential to capitalize on the increasing demand for cloud-computing services in the enterprise sector.
Ives believes that Microsoft is firing on all cylinders to surpass competitors. The company’s major focus in 2016 will be to increase market share against AWS. He predicts that the company will be much more aggressive in mergers and acquisitions pertaining to cloud computing in the next year.
Last year, research firm IDC projected that public IT cloud services spending will surge at a five-year CAGR of 22.8% to over $127 billion in 2018. The growth rate is six times that of the broader IT market. In 2018, public IT cloud services will constitute more than 50% of the global software and storage development budgets.
Microsoft is leaving no stone unturned and moving ahead with CEO Satya Nadella’s cloud-first mobile-first strategy. The cloud computing business is its fastest growing segment and management had projected earlier that $20 billion will be garnered in commercial cloud revenues by 2018.
Currently, Microsoft has a Zacks Rank #3 (Hold). A well-ranked stock in the same sector is Cadence Design Systems Inc. CDNS, sporting a Zacks Rank #1 (Strong Buy).
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