On Monday, after a reshuffling of $2.8 trillion of market cap across three sectors, brand-new sector...
Microsoft, Azure and the Cloud
10/05/2016 8:00 am EST
This featured portfolio holding is a high quality bellwether; it offers an attractive dividend yield and substantial upside ahead, explains Todd Shaver, editor of Bullmarket.
Microsoft (MSFT) is seeing its Cloud business booming. Microsoft’s Azure product is recording revenue growth of greater than 100% a year.
Recent reports indicate that channel partners — resellers of its products and services — see strong business trends for the company’s Cloud product, Azure.
Azure is a key pillar of expected EPS growth embedded in consensus forecasts. Accordingly, it is a good sign to hear that Azure is on track with expectations.
To be more specific, channel partners are seeing strong sustained growth for Microsoft Cloud products, with a couple of partners underscoring a pronounced uptick with respect to Azure.
One partner recently observed a renewed push by Microsoft to make inroads into the Federal government vertical with its government Cloud.
Lastly, a few channel partners referred to overall softness in their legacy Microsoft practices, partially driven by a faster-than-expected transition into the Cloud. This should be read as good news. Basically, the use of office desktop products is slowing because companies are transitioning to the Cloud.
We are fine with the legacy Microsoft business declining if the customers are moving to the Microsoft Cloud. It’s quicker and better, and a higher valuation is applied by the Street for the Cloud versus the desktop business.
While Microsoft’s Azure product faces fierce competition, but one channel partner noted that Microsoft’s head start with Office 365, and their inherent long term relationships in Enterprise IT gives Microsoft a slight advantage in the Cloud space.
Channel partners are suggesting momentum is building. We view Microsoft as a high quality portfolio holding with an attractive dividend yield and substantial upside ahead.
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