Microsoft Corporation (NASDAQ:MSFT) reported stellar quarterly results last month thanks to strong cloud momentum. The shares rallied over 9% in the days following the earnings announcement.
A Morgan Stanley analyst is of the view the stock remains a "strong buy" at current levels.
The Microsoft Analyst: Keith Weiss maintained an Overweight rating and $372 price target on Microsoft shares.
The Microsoft Takeaways: Secular growth trends powering Microsoft's topline — namely Cloud Computing, Digital Transformation, Productivity, Enterprise Automation and Security, along with strong operational efficiency — will drive margin expansion and propel its bottom line to over $20 in five years, analyst Weiss said in a note.
Durable high-teens EPS growth at an attractive GAAP P/E multiple is a recipe for solid stock performance, the analyst said.
"As the economy moves into mid-cycle recovery phase and investors seek assets with strong secular growth drivers, solid pricing power and earnings growth able to well outpace inflation," he said.
Microsoft can sustain 15% revenue CAGR through calendar year 2026, Weiss said.
Related Link: Microsoft Analysts See A Bright Future Following Strong Q2 Earnings; Cloud Computing A Major Driver
The company's commercial growth opportunities stem from two avenues: leveraging the information worker base and leveraging the platform for broader enterprise solution, the analyst said.
Microsoft has over 400 million information workers using the Office suite, which gives the company an audience to upsell additional user functionality, including Collaboration & Communication and Analytics & Visualization, he said.
On enterprise, the analyst said within the Intelligence Cloud and the Dynamics 365 family are foundational technologies such as Cloud Computing, Data Management and Machine Learning.
These technologies allow enterprises to build or buy the next generation of modern applications, Weiss said.
Along with the durable topline growth forecast, Morgan Stanley sees room for both gross margin and operating margin expansion. Margin growth can be achieved on the back of Azure shifting toward higher value solutions and Microsoft management continuing to operate the broader company very efficiently, the analyst said.
MSFT Price Action: At last check, Microsoft shares were up trading 1.05% higher at $304.12.
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