The stock price of a publically traded company is a seemingly convoluted stew that’s one part investor fear, two parts future predictions, and a dash of actual product or service execution from the business.
When the stew is boiling well, stock prices car soar to unprecedented heights and when just one ingredient is off, evaluations can plummet into the billions. When it comes to Microsoft, it seems the company’s head chef Satya Nadella has been cooking up a stew that can see the company’s stock price rise upwards of $80 sometime in 2017 according to Piper Jeffery analyst.
In particular, analyst Alex Zunkin believes with a couple more quarters of successful cloud development and expansion, Microsoft could raise its stock price 26.7% higher than where it is today, which currently sits at a decade high of $60 or higher some days.
As InvestorPlace reports, Zukin pens a letter to investors suggesting Microsoft’s growth potential through FY19.
“The central tenet of our investment thesis and $80 price target is the belief that Microsoft’s fast-growing Cloud businesses will lead to accelerated revenue and gross profit growth through FY19. We model a Cloud revenue CAGR of 33% through FY19 (which we define as revenue from Azure, Office 365 (commercial + consumer), LinkedIn and a portion of the Dynamics franchise) with Cloud going from 11.5% to 30.6% of Total Revenue while at the same time Cloud Revenue gross margins expand from 42% to 60%.”
The basic math Microsoft potentially generating more revenue at higher gross margins for increased profits isn’t lost the rest of the industry as well. It seems of the 36 analysts who know Microsoft stock, 26 of continue to rate the stock as a buy with a median price target of $68. While a Morgan Stanley analyst believes Microsoft can reach as high as $74 over the course of next year’s 12-months, it seems only Zukin and his potential client base will be aiming for the stars next year with Microsoft’s stock.
Whatever the outcome becomes of Microsoft’s stock next year, it’s interesting to see how the company maneuvers its new found stock appeal,