Microsoft Corporation (NASDAQ:MSFT) is in the spotlight after investment firm Trefis increased its price target for the stock to $87 from $66. Trefis said in its report that Microsoft’s Cloud business is thriving. The firm is also bullish on the company’s productivity business. Experts at Trefis also think that Microsoft’s margins will increase because of the company’s transformation towards the Cloud. Microsoft Corporation (NASDAQ:MSFT) Productivity and Business Processes unit, which covers Office, LinkedIn, ERP and CRM, is posting spectacular revenue growth. The unit’s revenue has grown from $27 billion in 2014 to $30.5 billion in fiscal 2017.
Trefis is also bullish on the future of Microsoft’s Personal Computing business. The PC business growth decline is slowing down. Microsoft’s Surface line of devices is getting very popular worldwide. PC sales around the world are also increasing. In April 2017, market research firm IDC said in a report that global shipments of PCs increased 0.6% year over year in the first quarter. This was the first ever growth in the PC market since the first quarter of 2012.
On Tuesday, Oppenheimer analyst Timothy Horan increased his price target for Microsoft Corporation(NASDAQ:MSFT) stock to $115 from $100, citing Cloud growth. The analyst said that Cloud business now accounts for about one-third of the company’s revenues. Cloud revenue is growing at a rate of about 38% year over year. Horan thinks that Microsoft’s Cloud platform is extremely innovative and offers a lot of value to the customers. He also thinks that Microsoft’s Cloud business carries lower operating costs than the rest of the company. Horan believes that Microsoft Corporation (NASDAQ:MSFT) cloud business revenue stands at $35 billion. According to his estimates, Microsoft’s Cloud business revenue will grow by $10 billion annually with EBITDA of $5 billion to $6 billion. In the fiscal first quarter 2018, server product and cloud services revenues grew by 17% year over year, with Azure revenues soaring 89% in the same period.
Microsoft Corporation (NASDAQ:MSFT) stock has increased by 25% over the last six months. One of the biggest growth catalysts for Microsoft stock in the short term is President Trump’s tax reform plan, which will allow big corporations to repatriate their cash. According to an estimate by Oppenheimer, Microsoft has about $130 billion overseas. Microsoft Corporation (NASDAQ:MSFT) will be in a position to raise its dividends or use its cash for stock buybacks. These initiatives will result in a stock boost in 2018.