Microsoft Corporation stock could gain as much as 30 percent in the coming year and a half according to a new report on the firm’s prospects. Barron’s published its outlook for the firm over the weekend and said that the cloud business would likely buoy a massive jump in the value of the firm.
Chris Bonavico, a portfolio manager at Jackson Square Partners, was asked his thoughts about Microsoft stock for the piece. He said “I think we see over $70 in 18 months, and, along the way, they’re going to pay you a nice dividend.” At time of writing shares in Microsoft Corporation were selling for 55.12, up 1.84 percent for the morning so far.
Microsoft has more than the cloud
Cloud, says the Barron’s piece, is going to be the major growth area for Microsoft in the coming years, and it’s one that some people, like Mr. Bonavico, reckon is being missed out on by Wall Street. Other areas that might be worth investing in, and Wall Street is apparently missing, include search and Office 365.
Search at Microsoft made a profit for the first time ever in the firm’s last quarterly return. It’s still not certain whether that will lead to an annual profit, however, and a profit from Bing may not be as meaningful as it was represented at the time of announcement.
At the end of November Raymond James analyst Michael Turits made it very clear where the future of the firm lies, despite the other segments that appear to be doing well. Turtis put a price target of $62 on Microsoft Corporation stock and said its “hyperscale” offering would allow it to become a truly major player in all sorts of business areas.
Microsoft stock needs cloud for balance
The cloud business has been the biggest story for Microsoft Corporation stock for years, and the business appears to be growing very quickly. The issue for those holding shares in the firm is whether or not that growth can offset big losses and slow downs in other parts of the business.
Microsoft is pretty bad at delivering a break down in earnings numbers that shows exactly what’s going on behind the scenes. It’s clear after the $8 billion or so write-down at its phone handset division, that hardware is still a long way of delivering a profit. The rollout of Windows 10 appears to be going well, but the OS doesn’t cost anything, and the bulk of upgrades have cost Microsoft money.
The cloud business is still a small one and the development of the market is still very uncertain. It’s clear that there’s great growth in the area, and that Microsoft is the leader in the space. What’s opaque is whether the climate will stay like that forever, what the risk is, and whether Microsoft Corporation stock can substantially grow as an overall business.
Right now shares in Microsoft are selling for more than 35 times their earnings from last year. That already prices a large amount of growth into the firm’s shares. Betting on an increase in that multiple, particularly given the less bombastic market conditions that have prevailed in 2015, is a risky prospect, no matter what way the cloud business is spun.
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