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Mention cloud computing and investors typically think about Amazon.com Inc. (Nasdaq: AMZN), Apple Inc. (Nasdaq: AAPL), and Alphabet Inc. (Nasdaq: GOOGL).
Very few think about Microsoft Corp. (Nasdaq: MSFT) - but they should.
Redmond-based Microsoft could not only be a $1 trillion company, but it could hit that mark sooner than any of the competitors I've just mentioned and, in the process, win the race to become the world's first trillion-dollar company.
I spoke about this on FOX Business Network on Tuesday with Neil Cavuto, when I made the point that the broader tech-led rollover (which started almost concurrently with my appearance) would treat tech stocks based on personal trust differently than those based on corporate data, security, and operations.
The former - led by Facebook Inc. (Nasdaq: FB) and Twitter Inc. (NYSE: TWTR), for example - are going to get clobbered, while the broader pullback will give savvy investors in the latter a massive and potentially very profitable opportunity.
I'm not alone in my thinking, either.
Morgan Stanley (NYSE: MS) analysts just released a new price target for MSFT of $130 a share within a year - or roughly 38.78% higher than where the stock is trading, as I write - which is a nudge higher than my own target of $125 a share within two years.
Microsoft has a few things going for it that stand out, and I'm thrilled to see Morgan Stanley take a slightly more aggressive view:
- CEO Satya Nadella's emphasis on cloud computing matches markets perfectly at a time when, according to Morgan Stanley, "public cloud adoption is expected to grow from 21% of workloads today to 44% in the next three years" - a figure I think is 10% too low, incidentally. Former CEO Steve Ballmer's view didn't... so he missed damn near every major development in the cloud computing space, overpaid for acquisitions that didn't make sense, and completely dismissed groundbreaking products - chief among them was the "smartphone."
- Microsoft has several cloud units, including everything serving up the Office 365 product line and Azure hosting. The company's also got the popular Xbox hardware and software, as well as LinkedIn.
- Microsoft has a massive user base, legacy contracts, and improving margins, all of which mean better operating income and earnings ahead over time.
Bear in mind, these are all things focused on the public cloud market, which will more than double to $250 billion over the same Morgan Stanley price target time frame. The private cloud market is estimated to grow at a compound annual growth rate of 31.61% over the next nine years, reaching $237 billion by 2026, according to research from Statistica.
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Gartner, a leading consultancy and technology research firm, suggests that the "cloud shift" we're talking about could impact more than $1 trillion in IT spending within the next two years - a staggering impact if I've ever seen one.
Importantly, the spending will be across virtually the entire spectrum, which you can clearly see in this chart, courtesy of Gartner:
Most investors will, of course, miss the massive, game-changing nature of what we're discussing... just as they'll fail to grasp what I'm going to say next.
About the Author
Keith is a seasoned market analyst and professional trader with more than 37 years of global experience. He is one of very few experts to correctly see both the dot.bomb crisis and the ongoing financial crisis coming ahead of time - and one of even fewer to help millions of investors around the world successfully navigate them both. Forbes hailed him as a "Market Visionary." He is a regular on FOX Business News and Yahoo! Finance, and his observations have been featured in Bloomberg, The Wall Street Journal, WIRED, and MarketWatch. Keith previously led The Money Map Report, Money Map's flagship newsletter, as Chief Investment Strategist, from 20007 to 2020. Keith holds a BS in management and finance from Skidmore College and an MS in international finance (with a focus on Japanese business science) from Chaminade University. He regularly travels the world in search of investment opportunities others don't yet see or understand.
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