Microsoft Stock Expected To Hit $ 400 As It Becomes A ‘Cloud Behemoth’, Analyst Says

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Microsoft (MSFT) released its first quarter 2022 results on Tuesday, beating Wall Street expectations as cloud revenue jumped 36% year-over-year. And according to at least one analyst, it could start a fire under the company’s shares.

“I think it’s just more fuel in the engine to drive this stock up,” Wedbush analyst Dan Ives told Yahoo Finance Live. “It just shows [Microsoft CEO Satya Nadella] in this cloud arms race continues to gain share.

Microsoft, which saw its stock jump 39% since the start of the year to $ 310.11 per share on Tuesday, is expected to cross the $ 400 mark, according to Ives. The stock was up just over 3% on Wednesday morning, trading at around $ 319 per share.

For the quarter, Microsoft’s cloud services generated $ 20.7 billion in revenue. The company is second in terms of cloud market share behind Amazon (AMZN) and ahead of Google (GOOG, GOOGL) and IBM (IBM).

The enterprise cloud is still in its infancy and spending is expected to continue to rise as more businesses move away from their own on-premises servers and lease cloud computing capacity. And the increased shift to remote work has only added to that. Additionally, Ives also doesn’t think a return to office work for employees will hurt Microsoft’s cloud business.

“Go back the last six months, enemies will say it will be a decelerating cloud, due to a COVID surge, quite the opposite,” Ives said.

Microsoft, of course, isn’t just seeing growth in its cloud business. It also continues to do well in terms of sales of its PC business.

The company, which launched its new Windows 11 operating system on October 5, increased its more personal computing segment by 15% year-over-year. But the current shortage of chips could bite in the future, as chips for desktops and laptops become scarce and more expensive.

The chip shortage has also piqued Microsoft’s gaming business, which falls under the More Personal Computing segment. The company’s Xbox Series X and Series S consoles are still incredibly hard to find almost a year after they hit the market. And third-party sellers charge nearly double their starting prices of $ 499 and $ 299, respectively.

For Ives, however, it’s just “noise” beside the larger cloud story at Microsoft.

“It’s all about the transformation of the cloud,” he said. “They have become a cloud giant at Microsoft. This is a $ 2 trillion market that is still in its third round. When doing a cloud transformation, I think that’s how you get a stock with a four in front.

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