Todd Shaver, growth stock expert and editor of BullMarket, remains bullish on Microsoft (MSFT) — a stock that he expects will soon reach the trillion dollar market cap level.
The recent announcement by the Pentagon that only two companies are “in competitive range” for the $10 billion JEDI Cloud contract can only help Microsoft on its trajectory toward a $1 trillion market cap
JEDI is more prosaically known as the Joint Enterprise Defense Infrastructure initiative, which means working with Silicon Valley to take Defense Department computers into the 21st Century.
Since it’s a winner-take-all project, booking that initial $10 billion can actually move the revenue needle for a decade to come even for a giant like Microsoft.
Once again, the company’s Windows operating system and Office productivity suite give it the inside track, since the Pentagon is already paying $1 billion to use that software and would appreciate any solution that doesn’t complicate that relationship.
Admittedly, the opportunity is so big that Microsoft’s own consultants have warned the Pentagon that sharing the contract makes more sense. Nonetheless, Alphabet (GOOG) is already out of the running and Amazon (AMZN) is the only serious contender left, with Oracle (ORCL) and IBM (IBM) having been passed over.
Whatever happens with JEDI, this stock is already up close to 20% this year, sprouting massive revenue opportunities that would make any smaller entity weep with envy. LinkedIn alone has boosted revenue 75% since Microsoft acquired it in 2016 and now contributes over $5 billion annually.
And with retailers shunning Amazon as a partner, Microsoft’s competing Azure computing platform is snagging major wins with store chains – partially because the enemy of my enemy is my friend, but also with Office 365 sweetening every offer.
All in all, revenue here grew 14% last year to $110 billion and we’re expecting 12% growth in 2019. Keep in mind that while the percentages are shrinking a little, it’s only because the comparisons get harder as Microsoft expands.
In real cash terms, the company found ways to capture an extra $14 billion last year and will undoubtedly boost sales by the same amount this year. Given its commanding stature already, simply staying on this track is an achievement.
We’re convinced Microsoft can keep bolting about $14 billion a year onto its top line for years to come, keeping its double-digit growth ramp alive. If organic opportunities run dry, there’s always $130 billion in cash to deploy on acquisitions.
Microsoft's market cap valuation will top $1 trillion, it’s only a matter of how long the next 8% push takes to play out. An expanded Pentagon relationship would accelerate that journey. Look for the announcement by the end of the month.
