Yes, that’s trillion in the headline. That’s one million millions, and a very big figure indeed.
CNBC reported on Monday that financial services firm Morgan Stanley told its clients that it thinks Microsoft could beat the likes of Google, Apple, and Amazon to the one trillion dollar market capitalisation mark based on the performance of its cloud business, and be looking at earnings before interest and taxes of over $50bn a year from now.
In a note sent to clients, Morgan Stanley’s Keith Weiss said that “Strong positioning for ramping public cloud adoption, large distribution channels and installed customer base, and improving margins support a path to $50 billion in EBIT and a $1 trillion market cap for MSFT.”
On the back of this, the firm raised Microsoft’s one-year share price target from $110 per share, to $130; should the share price reach the $130 mark, that would mean the company would be worth a literal trillion dollars.
Right now, Microsoft’s market cap is $728.86bn, trailing Alphabet (Google’s parent company) by just under $5bn, Amazon by just under $30bn, and Apple by $155.82bn, and its share price trades at around the $90 mark.
That share price hitting Weiss’s projected numbers isn’t an unreasonable target, either, as Microsoft shares have already risen by over 150% in value since Satya Nadella took over as CEO from Steve Ballmer in 2014. Nadella’s philosophy of pivoting Microsoft away from software and more into a company specialising in cloud services appears to being paying off, and Wall Street is taking note.
Morgan Stanley expects the public cloud market to double in size as public workloads grow from 21% to 44% over the next three years, and for Microsoft to maintain and expand its dominant market share by leveraging its existing (and expansive) customer base and distribution channels.
Where the bank sees Microsoft setting itself apart from its competition is with its analytics and machine learning capabilities, its productivity apps, front office apps as well as its “core financials”.
The news sent Microsoft’s share price climbing almost 9%.