Microsoft (MSFT) has been on quite the roll so far in 2014, improving by 25% since the new year kicked off. In fact, Microsoft stock has improved by almost 45% during the past 12 months, more than doubling the climb of the broader Nasdaq.
For potential and current MSFT stock fans, that means the question is now whether this tech outperformer can keep performing. If you ask FBR & Co., the answer is yes. The firm just maintained its “Outperform” rating on Microsoft stock, citing a few tangible reasons why shares should keep climbing higher.
Let’s take a look at three of them.
Windows 9 Reveal
In case September wasn’t an exciting enough month in terms of tech reveals for you, Microsoft is holding a little press briefing of its own next week. For what? Well, the company is expected to preview Windows 9, which FBR & Co. believes could be a “game changing” release for Microsoft.
Why? Well, for one, it definitely can’t go as poorly as the last Windows 8 release did. And, of course, they believe Windows 9 will be a “more unified platform” that will help integrate its device ecosystem … which brings us to reason No. 2.
Cloud and Mobile Focus
Basically, FBR & Co. is saying that Windows 9 will build on the company’s broader refocusing efforts, which included putting cloud at the forefront. In case you’ve been living under a rock, Kenneth Fick of InvestorPlace summed it up nicely in a recent piece about Microsoft stock, writing:
“In February, Microsoft (MSFT) appointed Satya Nadella, the former executive vice president of its Cloud division called Azure, as its new CEO. Nadella, who had headed Microsoft’ s Cloud platform since 2011, has promised to re-engineer the company from a PC-based software provider to an organization focused on cloud and mobile devices. To do this, he plans to divest underperforming business segments and cut costs to free up resources.”
He did note that the transition won’t necessarily be easy … but that didn’t stop him from being bullish. Fick added:
“Refocusing any organization will take time, and in business time is money. Luckily for Microsoft, they have a lot of it. And in the end, this transition will make for a stronger company — and a healthier stock.”
Potential PC Upgrade Cycle
That’s not all, though. FBR & Co. thinks there’s a cherry on top of this bull case … and it just might surprise you. In their bullish note on Microsoft stock, the firm added that it believes “there is a potential renaissance PC upgrade cycle underway as the end of life for Windows XP has helped improve PC demand on the business front.”
Yes, they did say PC demand. Then again, the firm did follow that up by saying that Nadella is also ensuring that the transition away from PC devices longer-term will be offset by growth in other areas (cough, cough, mobile) … which brings us right back to point No. 2.
All in all, it seems that Nadella’s plans still have folks believing in continued upside for Microsoft stock … and next Tuesday’s Windows 9 reveal should simply bring those plans center-stage again.
Keep in mind, though, that FBR & Co. rates Microsoft stock at “Outperform” with a price target of $51 … which represents just about 9% from the current MSFT pricetag. That’s nothing to sneeze at — just a reminder not to let expectations get out of hand.
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As of this writing, Robert Martin did not hold a position in any of the aforementioned securities.
