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Microsoft Likely to Beat Wall Street Estimates on Cloud Growth - Wedbush

Microsoft is benefiting from the current work-from-home environment, a Wedbush analyst says.
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Microsoft  (MSFT) - Get Microsoft Corporation Report likely will beat Wall Street's expectations again, a Wedbush analyst said Wednesday, and the software giant's cloud computing capabilities will be a key factor in its success.

Shares of the Redmond, Wash.-based company were up slightly to $224.80 in premarket trading Wednesday.

Analyst Daniel Ives, who has an outperform rating and a $260 price target on Microsoft, said he is expecting another "Josh Allen-like performance" from Microsoft, referring to the Buffalo Bills' star quarterback.

Ives said in an investors' note that he has seen "strong cloud activity" around Azure, Microsoft's cloud computing service, in the field during the December quarter "with another Street beat likely in the cards for MSFT."

The analyst said that the current work-from-home environment, which has been driven by the coronavirus pandemic, "is further catalyzing more enterprises to make the strategic cloud shift with Microsoft across the board with Azure growth remaining brisk."

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"This cloud shift and (work from home) dynamic looks here to stay and the company stands to be a major beneficiary of this trend on its flagship Azure/Office 365 franchise over the coming years," Ives said. 

With 33% of workloads in the cloud today poised to hit 55% by 2022, Ives added, "We believe this WFH shift has accelerated the cloud trend by roughly a year as more CIOs are now being forced to face the new normal/ reality for their respective organizations looking ahead."

The work-from-home shift will moderate as a vaccine is deployed around the around and many workers return to the office during the course of 2021, the analyst said.

"However, from an IT architecture perspective, the cloud shift will continue to gain speed as many CIOs aggressively go down the digital transformation path with MSFT's Azure/Office 365 footprint as the main enterprise cloud artery," Ives said.

In a nutshell, the analyst said, Microsoft CEO Satya Nadella and his company "continue to lead a transformational cloud story" narrowing the gap with Amazon  (AMZN) - Get, Inc. Report CEO Jeff Bezos and Amazon Web Services "into 2021, which combined will also have a major ripple impact for well positioned cyber security names protecting this cloud secular shift especially in light of the recent SolarWinds hack."

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