By
Godfrey Benjamin
April 18th, 2024
Microsoft (MSFT) stock price is slightly down today. Will Microsoft Corporation manage to become a $2 trillion-dollar company within two years?
Microsoft Corporation (NASDAQ: MSFT) stock prices rose by 1.14% at the last trading session. However, today MSFT is 0.28% down, trading at $184.39. Meanwhile, it is expected that Microsoft may hit $2 trillion valuation within two years. The same is said about Apple Inc (NASDAQ: AAPL) but the deadline for this milestone is 4 years.
It may happen thanks to the rise of cloud computing. As the rise of mobile devices has occurred, cloud computing services have also risen. The reason for this is that the background processes that the mobile apps depend on are “in the cloud”.
As new advancements in Information Technology are underway, the vast amounts of data need to be stored somewhere. Clouds offer this unique advantage.
With Microsoft Cloud Revenue Rise, $2 Trillion Valuation Is Real
Amazon.com Inc (NASDAQ: AMZN) currently leads the cloud space. Microsoft has been able to cover the revenue gap between the two tech giants. Wells Fargo securities analyst Philip Winslow told sources that he expects Microsoft (MSFT) stock price to grow by 55%. He said in a note to clients:
“We believe the COVID-19 pandemic has created a zeitgeist moment for [cloud computing] as a whole – changing [chief information officers’] cloud strategies forever … from which we expect Microsoft Azure to disproportionately benefit as the enterprise cloud.”
This unprecedented opportunity has arisen because of the new work from home directives for many businesses. As long as the pandemic continues, this will continue. New solutions are needed in the workplace. Cloud computing has everything it takes to scale up applications from smaller instances to enterprise versions.
Winslow also said that Microsoft was “narrowing the dollar revenue gap” between Azure and AWS. This is also while maintaining a firm lead over Google Cloud.
Microsoft has recovered from its 31% fall during the COVID-19 market crash. If the current market pattern holds, we are going to see the growth predicted. That is according to Winslow. If Microsoft can deliver revenue growth of about 14% for the next several years, we shall a 17% growth in earnings per share. This could give birth to $68.2 billion in free cash flows by 2023.
According to Winslow, if Microsoft can value the company 30 times its free cash flow then its valuation will hit $2.2 trillion in market capitalization. Microsoft’s intelligent cloud business unit is said to going to the engine of this growth.
This is also a part of a bigger pattern. Cloud services are getting smarter. It has to do with the many kinds of services that users are deploying off cloud services. As data sets become more complex, more computing power and storage capacity will be needed. This is one reason why this trend will stay in place.
Microsoft has one thing going for it that other cloud services don’t: an exclusive ecosystem.
This could be the other pillar that will make the trillion-dollar valuation happen.