The last time I weighed in on Microsoft (NASDAQ:MSFT), I noted, “With Microsoft quickly becoming a leader in the cloud market, it’s tough to bet against the stock at the moment. In fact, I believe Microsoft stock could easily test $180 a share near-term based on the strength of the cloud market alone. That becomes even easier to forecast with an increasing dividend yield and stock buybacks.”
That was Nov. 6, as the MSFT stock traded at a low of $143.20 a share. As of Jan. 22, the stock was up to $166.20 and running. From here, I still expect for Microsoft stock to rally to $180 in 2020. Where will this rise come from? Well, the company has a few ideas.
Microsoft Stock Has Plenty of Catalysts
Things have been good over at Microsoft as of late.
For one, Microsoft is quickly transforming itself into one of the top cloud giants with its Azure cloud business, where sales grew 59% year over year compared to 35% growth for Amazon (NASDAQ:AMZN) Web Services. That alone suggests MSFT is quickly gaining market share in the cloud race.
Second, the company is winning big deals. In October 2019, the Defense Department awarded Microsoft a cloud-computing contract worth up to $10 billion. The victory was massive for the company, which prevailed over competitors such as Amazon and Oracle (NYSE:ORCL).
Collectively, these two stimulants will drive MSFT stock higher as the company continues to grow its revenue streams and overall reach.
Analysts Are Very Confident in Microsoft’s Upside
With the aforementioned good news lately, how could analysts deny a positive future for Microsoft stock?
Wedbush analyst Dan Ives said the defense deal was a “game changer” for Microsoft, noting it “will have a ripple effect for the company’s cloud business for years to come.”
Additionally, in recent weeks, Ives again lifted his price target on MSFT stock from $185 to $195.
“Enterprise customers and partners we have spoken to over the past few weeks indicate a clear acceleration of larger and more strategic enterprise cloud deals as Redmond is poised to win the majority of the next phase of cloud deployments vs. the likes of Amazon and Bezos” he noted.
Even more reason to love MSFT, for first quarter of fiscal year 2020, the company beat on revenue and profits. Revenue of $33.1 billion was up 14% YOY and well ahead of forecasts for $32.23 billion. Also, Profits were up 24% YOY to $1.38, which was also ahead of expectations at $1.24 a share.
“The world’s leading companies are choosing our cloud to build their digital capability,” CEO Satya Nadella said. “We are accelerating our innovation across the entire tech stack to deliver new value for customers and investing in large and growing markets with expansive opportunity.”
Lastly — and just when you thought things couldn’t get better — a new generation of gaming consoles is set for release in 2020. During the holiday season 2020, the company will release its new XBOX Series X gaming console — possibly bringing higher highs to Microsoft stock.
The Bottom Line on MSFT Stock
With Microsoft quickly gaining market share in the cloud, it’s still tough to bet against the stock. In fact, as I noted before, I believe MSFT is a $180 stock, near-term based on cloud momentum alone. That said, if you combine the cloud catalysts with the new gaming console later in 2020, Microsoft could have another incredible year ahead.
That becomes even easier to forecast with its dividend yield and stock buybacks. In short, there’s nothing standing in the way of higher highs with Microsoft stock.
As of this writing, Ian Cooper did not hold a position in any of the aforementioned securities.