“For at least the next five years, we forecast Microsoft to deliver mid-to-high teens revenue growth,” the analysts, led by Phil Winslow, wrote in client report, noting the gains will be driven by mid-20s% growth in intelligent cloud, mid-teens growth in productivity and business processes, and 2%-to-5% growth in Windows, they said.
Credit Suisse anticipates earnings-per-share growth in the high-teens to 20%. “We believe these levels of sustained growth and profitability are still not properly reflected in consensus estimates or valuation,” Winslow said.
Microsoft’s cloud service Azure will shine, as companies continue to gravitate toward the cloud, Winslow said.
“We therefore expect Azure to continue to narrow the dollar revenue gap to No. 1 Amazon Web Services (AMZN) - Get Free Report and widen the gap to No. 3 Google Cloud (GOOGL) - Get Free Report,” the note said.
Microsoft shares were marked 0.25% higher in mid-morning trading Tuesday to change hands at $336.90 each, a move that extends the stock's year-to-date gain to around 55%.
Morningstar analyst Dan Romanoff puts fair value at $345 for Microsoft, raising it last month from $325. “We continue to see upside to this high-quality name,” he wrote in a commentary.
“Wide-moat Microsoft continues to benefit from digital transformation efforts at enterprise customers, which once again helped the company drive material upside compared with its revenue and EPS outlook for the quarter….
“We see results as reinforcing our thesis centering on the proliferation of hybrid cloud environments and Azure.”