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- Microsoft still has 23% upside potential even after it surpassed a $2 trillion valuation on Tuesday, according to Wedbush.
- Analyst Dan Ives said continued cloud growth for Microsoft's Azure platform will continue to impress Wall Street.
- Ives upped his price target on Microsoft to $325 from a prior target of $310 in a Wednesday note.
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Wedbush analyst Dan Ives thinks there's plenty of upside left for Microsoft, even after the Redmond-based software provider surpassed a $2 trillion valuation on Tuesday.
In a note on Wednesday, Ives said continued cloud growth for Microsoft's Azure platform could help drive a 23% rise from current levels. Ives increased his price target to $325 from $310 and reiterated his "Outperform" rating on the stock.
"We believe the Street's view of moderating cloud growth on the other side of this 16 month Work-from-home cycle is contrary to the deal activity Microsoft is seeing in the field with a robust June quarter likely around the corner," Ives explained.
Deal flow looks strong for Microsoft's Office 365 and Azure cloud combo deals heading into FY2022, according to Ives, and there's plenty of runway left for the company.
"We estimate that Microsoft is still only ~35% through penetrating its unparalleled installed base on the cloud transition," Ives said, adding that he expects Azure to steal market share from Amazon's AWS offering in the ongoing cloud race.
Microsoft would reach a valuation of about $2.5 trillion if its stock price rises to Ives $325 price target. The speed of Microsoft's ascension to the $2 trillion is extraordinary, given that it took the company three decades to reach a $1 trillion valuation, and only two years for it to hit $2 trillion.
"Microsoft remains our favorite large cap cloud play and we believe the stock will start to move higher over the coming quarters as the Street further appreciates the cloud transformation story in Redmond," Ives concluded.