Four Reasons Why Microsoft Could Run to $40

What to do with Microsoft (MSFT - commentary - Cramer's Take) these days? Last summer, as the Vista rollout was approaching and the stock had been crushed down to the low $20s, I loaded up on common stock and calls and had even shorted some puts.

I repeatedly noted Mister Softee's potential to run into the $30s and $40s, and because the market usually overshoots to the upside, I told Larry Kudlow on national TV that the stock could even run to $50 over the next few years.

Well, I still believe it could see at least $40, and here are four reasons why.

1. Higher PC Growth

Vista's adoption rate, while not gangbusters, is catalyzing a slow-but-sure bump in PC growth numbers. Most analysts are still modeling mid-single-digit PC growth for this year and next, but the latest backward-looking data indicate that those forward-looking estimates are too low. The latest IDC Quarterly PC Tracker revealed the "surprising" numbers that showed PC market growth at 2.4 points greater than previously predicted, with a growth rate of 10.9%.

2. The Echo Techo Bubble

It sure seems to be on track, even without any indication of a pending Fed cut. The Fed is still pumping new money supply into the economy at a double-digit growth rate, which is showing no signs of slowing down. And what if the Fed finally does cut because real estate's problems get as bad as I predict over the next few years? Then the Great Echo Techo Bubble of the 2000s will need to be capitalized in history books just like the Great Depression of the 1930s.

3. Executive Changes

CEO Steve Ballmer could get replaced. I'm always hesitant to bash executives who have created hundreds of billions of dollars in shareholder value and changed the world for the better along the way by helping to empower all of us. But from the Zune debacle to the hardly helpful results on Live Search (why spend billions building the MSN brand, only to move on when it was finally catching some traction?) to the endless mimicking of Google's (GOOG - commentary - Cramer's Take) M&A strategies (the purchase of aQuantive (AQNT - commentary - Cramer's Take) after the DoubleClick deal), Ballmer has made this company the anti-Gretsky of technology: Mister Softee skates to where the puck was last week, not to where it's headed.

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At the time of publication, the firm in which Willard is a partner was net long Microsoft, Google, Sony and Apple, although positions can change at any time and without notice.

Cody Willard is the manager of CL Willard Capital Management, LLC. He is a regular guest on Fox News, CNBC and other networks, and he writes a monthly column for the Financial Times. He is also an adjunct professor at Seton Hall University and the author of TheCodyReport.net, a monthly stock market newsletter. Willard appreciates your feedback -- click here to send him an email.