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Microsoft cloud services demand jumps 775%, stock tipped to lead next rally, say analysts 

Microsoft stock

Microsoft ‘s (NASDAQ: MSFT) stock price selloff has created an attractive buying opportunity, with analysts’ calling it an outperformer of the bear market and a leader in the next stock market rally. The whopping 775% demand growth for cloud services last week, reported by the traded firm is the main reason behind the optimism. Is commercial cloud revenue stood around $12.5bn in the second quarter.

The company said it is seeing robust usage increases in services that include Microsoft Teams, Windows Virtual Desktop, and Power BI – with most of the demand coming from regions that have enforced social distancing or lockdowns. It’s Windows Virtual Desktop usage surged close to threefold last week.

“We have seen a very significant spike in Teams usage, and now have more than 44 million daily users. Those users generated over 900 million meeting and calling minutes on Teams daily in a single week,” Microsoft says.

Besides the demand side, Microsoft has a cash pile of $136.6bn with a free cash flow generation potential of $7bn. Dividends also appear safe considering its cash generation potential and growth in demand. The company currently offers a quarterly dividend of $0.51 per share, yielding around 2%. It has increased dividends over the past 16 consecutive years. Its revenue stood around $36bn in the latest quarter while the company generated earnings per share of $1.51 per share

The latest acquisition of 5G software maker Affirmed Networks for $1.4bn hints Microsoft’s confidence in its cash generation and future fundamentals.

Microsoft cloud services demand...

While Microsoft stock price is down significantly from its all-time high of $190 a share, Wedbush analyst Daniel Ives says the selloff is an attractive buying opportunity and sets a price target of $210. “Even a 10%-plus ‘haircut’ to the cloud and enterprise drivers leaves what we value as a $900bn to $1trn valuation cloud franchise,” Ives said.

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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.