On Thursday, shares of tech giant Microsoft Corp. MSFT were gaining in afternoon trading, up over 1.7% to $76.01 by 2:00 PM EST after the company was upgraded earlier the day.
Canaccord Genuity analyst Richard Davis upgraded Microsoft stock to ‘Buy’ from ‘Hold,’ as well as raised his price target to $86 from $76 per share.
“Our analysis suggests that investors have underestimated the virtuous cycles that Microsoft has created by assembling four compelling growth drivers in: (1) office productivity; (2) gaming; (3) marketing, and (4) Azure’s platform as a service,” Davis said. “Our model teardown suggests that these drivers set the firm up for a sustained period of accelerating growth.”
In particular, Davis points out Microsoft’s gaming division, noting that the company, which makes the popular Xbox gaming system, could potentially become a big player in the e-sports industry. This industry is known for its huge video game tournaments, and already brings in thousands of participants and viewers, notes CNBC . Microsoft is set to release the latest version of Xbox, called the Xbox One X, in November, just in time for the holidays.
Davis also highlights the financial benefits Microsoft is seeing from moving its customers from continuous license versions of its trademark Office software to Office 365, the software-as-a-service (SaaS) cloud model. And combined with its Azure cloud computing platform and infrastructure, Microsoft presents a formidable competitor against Amazon’s AMZN Amazon Web Services.
Meanwhile, Davis projects Microsoft’s revenue growth could increase from 6% in fiscal 2017 to the range of 11%-15% by fiscal 2022. And, MSFT stock could reach $115 to $120 per share by the end of 2020 if “growth drivers play out as expected.”
Currently, MSFT is a #3 (Hold) on the Zacks Rank, with a VGM score of ‘C.’ Year-to-date, shares of the company has gained over 19% in value.
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