Microsoft stock has held up better than many peers during the recent tech stock sell-off. So on Thursday, Microsoft (MSFT) received a fresh buy rating from an analyst who said the company’s many strengths cannot be denied.
Rosenblatt Securities analyst John McPeake initiated coverage of Microsoft stock with a buy rating and a 12-month price target of 301.
On the stock market today, Microsoft stock rose 1.7% to 243.03.
“Microsoft is the most important software company on the planet,” McPeake said in a note to clients. “With 75% of revenues coming from recurring and repeatable sources and multiple growth drivers ahead, we think Microsoft’s risk/reward is highly favorable.”
50% Upside Possible For Microsoft Stock
McPeake provided a long list Microsoft’s market strengths. Microsoft has more than 1.3 billion devices worldwide running its Windows 10 operating system. It has more than 1.2 billion users of Microsoft Office software. Microsoft also boasts the largest software developer community in the world at upwards of 55 million unique users on GitHub.
With its Azure cloud services, Microsoft has a strong second-place position in cloud computing behind Amazon.com‘s (AMZN) Amazon Web Services.
Microsoft has 756 million members on LinkedIn and more than 100 million monthly active users on its Xbox Live video game service. Plus, it has seen a 10-fold increase in daily active users of its Teams online communications platform in the past year, to 145 million users.
“Microsoft should be able to grow the top line in the mid-teens while expanding operating margins moderately over the next five years, driving annual (earnings per share) and free cash flow growth in the mid-teens at scale,” McPeake said.
He believes Microsoft stock can show upside of 50% growth over the next five years.
Microsoft stock is in the IBD Long-Term Leaders Portfolio. MSFT stock also is on IBD’s highly selective Leaderboard watchlist.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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