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Microsoft (MSFT) had an excellent 2021 and signs are 2022 will be no letdown either. At least, that is the opinion of Wedbush's Daniel Ives.
“We believe large transformational cloud deals at MSFT are up north of 50% with clear momentum heading into 2022 and also some incremental share gains from AWS could be in the cards,” the 5-star analyst said.
Ives’ comments follow December quarter checks in which the tech giant has shown “incremental strength again” with the Azure cloud growth story “hitting its next gear of growth.”
Contrary to Wall Street’s expectation of “moderating” cloud growth once the WFH trend subsides, Ives thinks the deal activity in the field indicates the “digital transformation” is far from over, and positions Microsoft to “beat Azure whisper growth numbers of ~43% this quarter.”
Only 35% of Microsoft’s “unparalleled installed base” has so far transitioned to the cloud. Additionally, with remote work expected to play a big part still over the coming years, Ives thinks this trend “disproportionally” benefits the company.
The analyst forecasts that by the end of 2022, enterprise workloads on the cloud will rise from 43% right now to 55%. This will naturally also be a boon for rivals AWS and Google and others such as IBM, although none, according to Ives, are as well-positioned as Microsoft to reap the rewards.
Furthermore, the analyst believes there could be “another $5 billion+ incremental tailwind” this year due to the “strategic poker move” of the Office 365 price increase.
Despite “multiple/valuation compression and a tightening Fed backdrop,” Ives believes the Street is still underestimating the “underlying” Microsoft growth story and expects the stock will continue to trend higher over the next 6 to 9 months. “We believe MSFT is on its way to a $3 trillion market cap over the next 12 months,” the 5-star analyst summed up
As such, as one of Ives’ “favorite tech stocks for 2022,” the analyst rates MSFT an Outperform (i.e. Buy) and backs it up with a $375 price target. Investors are looking at one-year gains of 22%, should Ives’ forecast go according to plan. (To watch Ives’ track record, click here)
Looking at the consensus breakdown, barring one skeptic, all other analyst reviews are positive, culminating in a Strong Buy rating from the Street’s analysts. The $373.91 average target is practically the same as Ives’ objective. (See Microsoft stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.