Piper Sandler says that Microsoft is one of the best-positioned of the “cloud titans” for the next decade.
Gerard Julien/AFP via Getty Images
Microsoft last week posted spectacular December-quarter results, which included 34% growth in what it calls its “commercial cloud business,” which encompasses Azure, Office 365, and various other things. That came to $16.7 billion in revenues for the quarter—about 39% of the company’s total $43.1 billion. And the number is going to get bigger from here. A lot bigger.
After doing a deep dive on the state of the cloud industry, Piper Sandler analyst Brent Bracelin on Tuesday wrote that Microsoft (ticker: MSFT) is one of the best-positioned of the “cloud titans” for the next decade. He thinks the company can boost its total commercial cloud business to $306 billion by calendar 2030, up from $59 billion in calendar 2020.
“Microsoft remains in a pole position as the world’s largest cloud platform…driven by a broad product offering across infrastructure and applications,” he writes, with more revenue than Amazon.com ‘s (AMZN) Amazon Web Services’ estimated $45 billion in 2020. Granted, this is a bit of an apples-and-oranges comparison, since the Microsoft total includes cloud-based applications, but it does make the point that Microsoft plays a commanding role in cloud computing.
Bracelin says growth will be driven by a combination of “an expanding cloud product portfolio, strong enterprise and government ties, and a consumption-based pricing model.”
He sees continued double-digit Microsoft revenue growth and contends the company warrants a premium multiple as a high-margin software company operating at a huge scale. He considers Microsoft a core holding, and says there could be 25% upside to his $300 price target. That implies a potential stock price of $375, which would bring the company’s valuation to $2.9 trillion.
Microsoft was up in trading, at $241.26. The S&P 500 was up 1.8%.
Write to Eric J. Savitz at [email protected]
