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Microsoft (MSFT) Is On a High, Focus on Azure a Key Catalyst
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Shares of Microsoft Corporation (MSFT - Free Report) have returned 40.7%, outperforming the industry’s rally of 30.6%.
This momentum can be attributed to impressive traction gained by Azure, robust performance of Office 365 and LinkedIn. Morgan Stanley’s note stating that Microsoft will lead it to a market capitalization of $1 trillion within the next 12 months has also kept its stock performance on a high, of late.
What’s Riding the Stock?
Microsoft is remodeling its structure, with emphasis on Azure and building its Artificial Intelligence capabilities. Microsoft recently announced that it will invest $5 billion over the span of upcoming four years on Intenet of Things devices with a view to aid connected device businesses. The company’s core infrastructure services, customer base and distribution channels are majorly accountable for its long-term growth in cloud services. Going forward, this move is likely to benefit the company’s overall top-line and bottom-line.
Strengthening Azure Capabilities: Key Driver
Azure is a set of cloud services that IT and developers utilize in building and managing applications through Microsoft’s datacenters.
In the second quarter of fiscal 2018, Azure revenues grew 98% at constant currency (cc) on a year-over-year basis. Management expects commercial cloud gross margin to improve on a year-over-year basis, backed by Azure margin improvement.
Moreover, data center expansion continues with Azure in two new regions of Australia with the aim to aid the governments of both Australia and New Zealand. Notably, per a report by Markets and Markets, government cloud market is expected to grow at a CAGR of 13.4% between 2017 and 2022.
Further, according to a latest report of P&S Market Research, the cloud market in government sector is expected to reach $49.2 billion by 2023. Microsoft is anticipated to gain significantly from this move.
Azure currently covers 50 regions globally, more than any other cloud provider. Furthermore, the acquisition of PlayFab and Avere Systems are anticipated to enhance Azure’s enterprise-strength capabilities.
Office 365: Another Catalyst
Office 365 (O365) is a subscription plan to access Office applications and other productivity services utilized in cloud services. The company is striving to catch up with Alphabet’s (GOOGL - Free Report) G-Suite by empowering Office 365.
We note that strong O365 and Windows 10 adoption are other growth drivers. The launch of a plethora of products — Microsoft Teams in O365 for Education, Microsoft 365, Microsoft Relationship Sales solution and ISV Cloud Embed – is anticipated to drive installed base. Moreover, Microsoft continues to add features to Windows 10 that makes it more attractive for consumers as well as enterprises.
LinkedIn is a Significant Contributor
LinkedIn contributed revenues of $1.3 billion in the second quarter of fiscal 2018. LinkedIn sessions were up more than 20% for the fifth consecutive quarter. Its revenues are projected to be $1.2 billion for third quarter of fiscal 2018, growing above 20%.
Management recently commented that this segment has been performing better than previously expected as it is now growing much faster than before. As LinkedIn becomes more integrated into the Microsoft, it is expected to push overall top line growth above 10% (when combined with Azure/O365).
Positive Earnings Surprise History
Microsoft has an impressive earnings surprise history. The company outpaced the Zacks Consensus Estimate in the trailing four quarters, delivering a positive average earnings surprise of 18%.
Microsoft Corporation Price, Consensus and EPS Surprise
Microsoft is projected to witness quarterly sales climb to $25.71 billion, based on current Zacks Consensus Estimates, which would mark a 9.12% year-over-year ascent. The company is expected to see its bottom-line expand by 16.44% to reach 85 cents per share.
Further, Microsoft has a long-term expected EPS growth rate of 11.88%.
The projected earnings growth rate (3-5 years) for Mellanox and NVIDIA are 15% and 10.25%, respectively.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
Image: Bigstock
Microsoft (MSFT) Is On a High, Focus on Azure a Key Catalyst
Shares of Microsoft Corporation (MSFT - Free Report) have returned 40.7%, outperforming the industry’s rally of 30.6%.
This momentum can be attributed to impressive traction gained by Azure, robust performance of Office 365 and LinkedIn. Morgan Stanley’s note stating that Microsoft will lead it to a market capitalization of $1 trillion within the next 12 months has also kept its stock performance on a high, of late.
What’s Riding the Stock?
Microsoft is remodeling its structure, with emphasis on Azure and building its Artificial Intelligence capabilities. Microsoft recently announced that it will invest $5 billion over the span of upcoming four years on Intenet of Things devices with a view to aid connected device businesses. The company’s core infrastructure services, customer base and distribution channels are majorly accountable for its long-term growth in cloud services. Going forward, this move is likely to benefit the company’s overall top-line and bottom-line.
Strengthening Azure Capabilities: Key Driver
Azure is a set of cloud services that IT and developers utilize in building and managing applications through Microsoft’s datacenters.
In the second quarter of fiscal 2018, Azure revenues grew 98% at constant currency (cc) on a year-over-year basis. Management expects commercial cloud gross margin to improve on a year-over-year basis, backed by Azure margin improvement.
Moreover, data center expansion continues with Azure in two new regions of Australia with the aim to aid the governments of both Australia and New Zealand. Notably, per a report by Markets and Markets, government cloud market is expected to grow at a CAGR of 13.4% between 2017 and 2022.
Further, according to a latest report of P&S Market Research, the cloud market in government sector is expected to reach $49.2 billion by 2023. Microsoft is anticipated to gain significantly from this move.
Azure currently covers 50 regions globally, more than any other cloud provider. Furthermore, the acquisition of PlayFab and Avere Systems are anticipated to enhance Azure’s enterprise-strength capabilities.
Office 365: Another Catalyst
Office 365 (O365) is a subscription plan to access Office applications and other productivity services utilized in cloud services. The company is striving to catch up with Alphabet’s (GOOGL - Free Report) G-Suite by empowering Office 365.
We note that strong O365 and Windows 10 adoption are other growth drivers. The launch of a plethora of products — Microsoft Teams in O365 for Education, Microsoft 365, Microsoft Relationship Sales solution and ISV Cloud Embed – is anticipated to drive installed base. Moreover, Microsoft continues to add features to Windows 10 that makes it more attractive for consumers as well as enterprises.
LinkedIn is a Significant Contributor
LinkedIn contributed revenues of $1.3 billion in the second quarter of fiscal 2018. LinkedIn sessions were up more than 20% for the fifth consecutive quarter. Its revenues are projected to be $1.2 billion for third quarter of fiscal 2018, growing above 20%.
Management recently commented that this segment has been performing better than previously expected as it is now growing much faster than before. As LinkedIn becomes more integrated into the Microsoft, it is expected to push overall top line growth above 10% (when combined with Azure/O365).
Positive Earnings Surprise History
Microsoft has an impressive earnings surprise history. The company outpaced the Zacks Consensus Estimate in the trailing four quarters, delivering a positive average earnings surprise of 18%.
Microsoft Corporation Price, Consensus and EPS Surprise
Microsoft Corporation Price, Consensus and EPS Surprise | Microsoft Corporation Quote
Growth Projections
Microsoft is projected to witness quarterly sales climb to $25.71 billion, based on current Zacks Consensus Estimates, which would mark a 9.12% year-over-year ascent. The company is expected to see its bottom-line expand by 16.44% to reach 85 cents per share.
Further, Microsoft has a long-term expected EPS growth rate of 11.88%.
Zacks Rank & Stocks to Consider
Microsoft carries a Zacks Rank #3 (Hold).
A couple of better-ranked stocks in the broader technology sector are Mellanox Technologies, Ltd. and NVDIA Corporation (NVDA - Free Report) , currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The projected earnings growth rate (3-5 years) for Mellanox and NVIDIA are 15% and 10.25%, respectively.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>