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Microsoft is riding a wave of positive mind share and good execution, and it appears that is also affecting the company’s share price, which has hit record highs 6 times in the last 10 days, according to site Investors.com.
Analyst companies Morgan Stanley and Piper Jaffray have both weighed in positively on the future of the company, currently valued at $63.50 per share, with Morgan Stanley analyst Keith Weiss reiterated his overweight rating on Microsoft stock, with a price target of $72.
In a report he noted that accelerating sales, gross profit margin stabilization, operating margin expansion and aggressive share repurchases will drive improving Earnings per Share (EPS) growth at Microsoft, saying Microsoft’s recent purchase of professional social network LinkedIn will add momentum to the company’s earnings growth and lead to sustained double-digit EPS growth.
“Combining Microsoft’s broad distribution channels with LinkedIn’s Sales Navigator, Talent Solutions, and Lynda.com/LinkedIn Learning products should drive improved near-term monetization of individual and commercial user bases, increased engagement, and valuable integration and upsell opportunities with Microsoft Office 365 and Dynamics 365,” Weiss said. “Longer term, we think there is additional strategic value creation and opportunities in mobile, productivity, automation, and intelligence from bringing together LinkedIn’s unique data set with Microsoft’s cloud assets, Cortana and other AI technologies.”
Piper Jaffray analyst Alex Zukin who initiated coverage of Microsoft with an overweight rating and price target of $80, was even more positive.
“We see Microsoft as a mega cap growth story that is in the driver’s seat of a generational shift to cloud computing,” Zukin said. “While in our minds Microsoft has clearly made the leap to being relevant in the new cloud world, we view the next step as the company becoming once again strategic for large enterprises.”
He expected latent demand for Microsoft’s Azure, Office 365 and Dynamics 365 cloud services to unlock accelerating revenue growth with higher margins.
The company’s share price spent more than a decade in limbo under the stewardship of Steve Ballmer, despite growing revenue by nearly 300%. Under Satya Nadella, who continued to pursue Microsoft’s cloud ambitions, dropped the unprofitable phone business and refocused on enterprise, the share price has increased more than 50%, finally exceeding the record highs of the original internet bubble of the early 2000’s and is currently forging new highs.
A growing share price makes it cheaper for the company to bring in new talent and reward employees, with Microsoft under Satya Nadella completing 36 major acquisitions in his first 2½ years as CEO—almost triple the 13 Steve Ballmer made in the previous 2½ years.