Microsoft could soar 16% on 'unparalleled' cloud dominance and continued work-from-home, says Wedbush senior tech analyst

• Microsoft could gain 16% over the next year as cloud computing becomes a "transformational secular trend," according to Dan Ives, Wedbush senior technology analyst.
• His team explained in a note to clients that the current work-from-home environment is catalyzing more workplaces to adopt cloud technologies, and Microsoft's cloud computing platform Azure has an "unparalleled installed base" on the cloud transition.
• "We believe Azure's cloud momentum is still in its early days of playing out within the company's massive installed base," added Ives.
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Microsoft is at the helm of the "transformational secular trend" that is cloud computing, said Wedbush's Dan Ives.

The senior equity research analyst who covers the technology sector sees the stock hitting $260 in the next year, a 16% upside from current levels, and he has an "outperform" rating for Microsoft.

His team explained in a note to clients that the current work-from-home environment is the catalyst for more workplaces to adopt cloud technologies, and Microsoft's Azure cloud platform stands to benefit.

"Deal flow looks strong heading into the rest of FY21 as we estimate that Microsoft is still only ~35% through penetrating its unparalleled installed base on the cloud transition," Ives said. "To this point, we believe Azure's cloud momentum is still in its early days of playing out within the company's massive installed base and the Office 365 transition for both consumer/enterprise is providing growth tailwinds over the next few years."

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Ives added that the coronavirus pandemic has accelerated cloud adoption by roughly a year as more CIOs have to face the new normal of working virtually. At the moment, he said 33% of workloads use cloud technology. That may hit 55% by 2022.

Although a coronavirus vaccine may be deployed globally during 2021 and the work-from-home trend may lose momentum, Ives still sees a major opportunity for Microsoft's cloud technology.

"From a valuation basis, even if we take a 10%+ haircut to the cloud and enterprise growth drivers, we are still looking at what we value as a $1 trillion valuation cloud franchise for Redmond," he added.