Deutsche Bank affirmed its Buy rating on Microsoft (NASDAQ: MSFT) with a price target of $55. FY16 EPS was raised to $3.03 from $2.94. Comments follow its annual partner/reseller event and come ahead of the company's Q4 results on July 21st. Analyst Karl Keirstead noted Microsoft was pushing to drive actual deployment and usage of Office 365.

"MSFT’s messaging at the partner event was all about empowering its tens of thousands of partners and resellers to sell more cloud subscription services. While “Commercial Cloud” revenues are only 7% of MSFT’s current mix, this transition is having an out-sized impact on Street sentiment. Key takes were that MSFT is trying to bundle far more cloud services around Office 365, motivate its army of partners (largely through financial incentives) to push cloud services and to drive actual deployment and usage of Office 365, which is tracking well below sold seats (MSFT is now compensating partners/resellers on usage)," said Keirstead.

"We spoke with one Fortune 50 customer that is ramping its MSFT spend by 30% and displacing IBM (NYSE: IBM) and other vendors as MSFT bundles more services into its EAs," continued the analyst.

Keirstead added, "We conclude that the weak PC market is largely in the stock, the cloud transition story is playing out successfully and will lift sentiment for some time and that MSFT’s valuation multiples will appear more reasonable to the skeptics as EPS growth recovers in FY16."

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Shares of Microsoft closed at $46.66 yesterday.