Goldman Sachs Sees Accelerating Growth at Microsoft (MSFT); Rating Raised to 'Buy'
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(Updated - November 17, 2016 8:27 AM EST)
Goldman Sachs upgraded Microsoft (NASDAQ: MSFT) from Neutral to Buy with a price target of $68.00 (from $60.00), implying 16% upside. Analyst Heather Bellini estimates that overall public cloud revenue will more than quadruple from around $30 billion in 2016 to $140 billion in 2020, and Microsoft is expected to benefit.
"Azure is the #2 market share vendor in the cloud space, and has grown 100% or more yoy eight of the last ten quarters, and in fact growth accelerated in C3Q16. With a large Microsoft customer base and strong C-level relationships, we believe Azure can continue to grow revenue and improve margins over time. Our views are supported by channel partners as well, who have commented recently that they are seeing strong uptake of Azure amongst enterprise customers, particularly as it relates to hybrid cloud," said Bellini.
"Our upgrade is based on 1) accelerating growth in gross profit dollars driven by its cloud transition, 2) an inflection in incremental operating margins as cloud profitability ramps and operating expense growth remains muted, and 3) upside potential to consensus out year EPS forecasts," added the analyst.
Goldman Sachs increased revenue estimates by $650 million to $102 billion in FY18 and $1.5 billion to $111 billion in FY19. Non-GAAP EPS estimates increased by $0.21 to $3.30 in FY18 and $0.31 to $3.74 in FY19.
Shares of Microsoft closed at $59.65 yesterday.
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Create E-mail Alert Related CategoriesAnalyst Comments, Analyst EPS Change, Analyst EPS View, Analyst PT Change, Hot Upgrades, Upgrades
Related EntitiesGoldman Sachs, Heather Bellini
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