Microsoft's 2020 Could Define Company for Next Decade, Piper Sandler Says

Cloud computing and M&A opportunities could define Microsoft for the next 10 years, a Piper Sandler analyst says.
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This year will be a big one for Microsoft  (MSFT) - Get Report as the software giant looks to increase its cloud-computing-market share and fuels growth through mergers and acquisitions, a Piper Sandler analyst wrote.

Microsoft’s $67 billion cash pile along with an estimated $200 billion in operating cash flow over the next three years could fuel M&A activity that will define the company for the next decade, analyst Brent Bracelin wrote.

“The company has a unique opportunity to further elevate its cloud leadership position through share gains and needle-moving M&A,” Bracelin wrote. 

“With less than 5% market share in business-application software across front-office and back-office segments, MSFT has many options to enhance its position as a trusted enabler of the digital enterprise beyond Azure, Office 365, LinkedIn and GitHub.”

Piper Jaffray raised its price target on the company 20% to $190 a share from $158. The price target represents 15% potential upside from the stock’s Wednesday close at $165.70.

The firm sees several tailwinds in 2020 that will outweigh its headwinds, including cloud momentum, rising developer popularity through GitHub and Visual Studio, further expansion into the $80 billion security market and conservative gaming estimates that the company has a good chance of surpassing.

The headwinds include CPU shortages at Intel  (INTC) - Get Report that affect 21% of sales tied to Windows and Surface devices. Another: the end of support tailwinds on Windows 7, Server 2008 and SQL.

Microsoft shares at last check were up 0.3% at $166.24. The shares are up a bit more than 5% so far this year.