Four Bullish Catalysts Driving Microsoft (Nasdaq: MSFT) Stock After Earnings Release

[This MSFT stock story was updated July 23] Microsoft Corp. (Nasdaq: MSFT) stock is up slightly this morning (Wednesday) after the company reported earnings per share (EPS) of $0.55 and revenue of $23.38 billion yesterday afternoon.

MSFT earnings

Revenue beat expectations of $23 billion, but EPS missed analysts' estimates of $0.60 for the quarter. However, Microsoft attributed the earnings miss to its acquisition of Nokia Corp. (NYSE ADR: NOK), which the company said accounted for a loss of $0.08 per share.

For shareholders, one of the largest takeaways was the company's success in the cloud-computing industry.

"We are galvanized around our core as a productivity and platform company for the mobile-first and cloud-first world, and we are driving growth with disciplined decisions, bold innovation, and focused execution," Chief Executive Officer Satya Nadella said. "I'm proud that our aggressive move to the cloud is paying off - our commercial cloud revenue doubled again this year to a $4.4 billion annual run rate."

The company also reported that revenue from its Devices and Consumer segment grew 42% to $10 billion, and that revenue from its Commercial segment grew 11% to $13.48 billion.

For the full fiscal year 2014, MSFT reported GAAP revenue of $86.8 billion. That was a near 12% increase from 2013's total of $77.8 billion.

Nadella made headlines last week when he announced that Microsoft would be laying off approximately 18,000 employees, or 14% of the company's workforce. That news sent shares to a 52-week high of $45.15.

And while Microsoft's revenue totals from today should send the stock higher in the short term, there are more catalysts that will drive MSFT stock higher for months and years to come.

Four Bullish Catalysts Driving MSFT Stock Now

"Most investors have written this company off - or have forgotten about it altogether," Money Morning's Defense and Tech Specialist Michael Robinson said. "I think Microsoft is going to show us something very special. The stock is up nearly 20% this year; it has a $50 billion cash hoard, and a committed dividend policy. It has a new CEO. And it just spent $7 billion in a big buyout. It's the kind of corporate turnaround play that I just love."

According to Money Morning's Executive Editor Bill Patalon, there are four major catalysts driving MSFT stock now...

One huge one is new CEO Satya Nadella.

"Satya Nadella is in the CEO office and is firmly in charge, setting the new tone and company direction, and announcing a massive layoff last week," Patalon said.

When Nadella made his major layoff announcement last Thursday, MSFT soared to a 52-week high, and the stock has traded just below those levels since.

Another major catalyst for MSFT stock is the huge growth the Cloud computing industry is experiencing.

"Market researcher Forrester says the Cloud market - where customers pay vendors to host data and applications at remote computer centers - will hit $55 billion by the end of this year," Patalon said. "By the end of this decade, that number will climb to more than $241 billion."

And according to research from the firm Gartner, Microsoft's cloud platform ranks second behind only Amazon.com Inc. (Nasdaq: AMZN). It ranks ahead of Google Inc. (Nasdaq: GOOG), Computer Sciences Corp. (NYSE: CSC), and International Business Machines Corp. (NYSE: IBM).

Additionally, Microsoft's recent purchase of Nokia Corp. (NYSE ADR: NOK) will boost the company's mobile presence and help the Windows Mobile operating system gain a bigger portion of the market. Market Researcher IDC sees MSFT's market share for mobile operating systems growing from 3.5% this year to 6.4% in 2018.

Finally, Microsoft's integrated product lines should continue driving revenue. In the same mold of Apple Inc. (Nasdaq: AAPL) iPads, iPhones, and iPods, Microsoft's product line are becoming much more integrated.
"The hardware Microsoft makes - the Surface line of tablets, its Xbox gaming system, and now its Nokia lineup of mobile devices - figures to become ever more important to the company's ongoing turnaround," Patalon said. "The devices can help drive 'brand awareness' up and down the product family, and drive growth in the Cloud, in mobile, in software, and in products yet-to-be unveiled."

MSFT Stock in the Long Term

While MSFT stock trades near, Robinson believes it still has a lot of room to grow.
"If Microsoft's shares just got back to their late-1990s highs in the neighborhood of about $60, we'd be looking at a profit of 44% from current levels," Robinson said. "I think these are the minimum gains we can expect to see. Given Nadella's aggressive plans for mobile and cloud computing, all that cash, and the other catalysts, I believe that Microsoft will continue to earn double the market returns over the next few years. This leader-turned-laggard has become a leader again."
Keep up to date on all the important releases this earnings season with Money Morning's Q2 earnings calendar...