Microsoft stock stumbles but cloud spending supports upside

Microsoft stock price has been under pressure over the past few weeks amid the broader market volatility as the surge in virus infections has forced the governments to place lockdowns.

Besides the short-term volatility, the market analysts are optimistic about Microsoft stock performance in the days ahead. The company is likely to benefit from staying at home policies because it will increase users’ focus toward online platforms.
MSFT Microsoft Corporation daily Stock Chart

Cloud spending growth supports Microsoft stock

Microsoft’s move towards the cloud markets has been adding significant revenue growth over the past couple of quarters. In the latest quarter, its intelligent cloud segment reported a 20% year-over-year revenue growth to $12.99B.

“Demand for our cloud offerings drove a strong start to the fiscal year with our commercial cloud revenue-generating $15.2 billion, up 31% year over year. We continue to invest against the significant opportunity ahead of us to drive long-term growth,”

says CFO Amy Hood.

Cloud infrastructure services spending jumped almost 33% in the September quarter, according to new Canalys data. This represents a growth of $2 billion from the previous quarter. The report indicates that Microsoft was the second biggest beneficiary of cloud spending growth.

Financial performance backs Microsoft stock

The company has been generating double-digit revenue and earnings growth over the years. It has sustained that trend in the first quarter of 2021. Its first-quarter revenue grew 12% year over year to $37.2 billion while earnings per share soared almost 30% from the past year period.

The market analysts have praised its financial performance. Morgan Stanley has provided a price target of $249 to Microsoft stock. Microsoft stock is currently trading around $200, up 28% since the beginning of this year.

Its analysts Keith Weiss said,

“The road is clear to the strong secular positioning likely to drive double-digit revenue growth and a mid-teens total return from Microsoft for the next several years.”

Siraj Sarwar - Lead Analyst
@tradethedayfx
Siraj Sarwar has been performing analysis on the stock market, equity research and general business consultation. He regularly contributes articles on economics, commodities, and equities to the world's leading websites, including Trade the Day, SeekingAlpha, TheStreet, and MSN.
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