The firm sees 10 strategic M&A opportunities for Microsoft in 2020, which it sees as a potential "defining year" for the next decade
In a research note to investors on Thursday, Piper Sandler analyst Brent Bracelin raised his price target for Microsoft (MSFT) to $190 saying that 2020 could be the "defining year" for the next decade at the company. The analyst believes Microsoft has a "unique opportunity" to further elevate its cloud leadership position through share gains and "needle-moving" acquisitions.
DEFINING YEAR: Maintaining an Overweight rating on the shares, Piper Sandler's Bracelin raised his price target for Microsoft to $190 from $158. The analyst told investors that he believes 2020 could be the "defining year for the next decade" at Microsoft. The company has a "unique opportunity" to further elevate its cloud leadership position through share gains and "needle-moving" acquisitions, the analyst added.
With $67B in net cash and investments and another $200B of future operating cash flows over the next three years, Bracelin argued that acquisitions "could take center stage in 2020." Further, he noted that Microsoft has "many options to enhance its position as a trusted enabler of the digital enterprise" beyond Azure, Office 365, LinkedIn, and GitHub. He cited the company's cloud, gaming, and security potential for the target raise and recommended continuing to own the shares as a core cloud holding.
10 STRATEGIC M&A OPPORTUNITIES: After applying Microsoft's acquisition philosophy and framework across the business application software universe, Piper Sandler's Bracelin has identified potential acquisition targets that he would deem to be "needle-moving pursuits." The 10 strategic M&A opportunities he sees include Autodesk (ADSK), Twilio (TWLO), Workday (WDAY), Salesforce (CRM), UiPath, RingCentral (RNG), Zendesk (ZEN), Flexport, Unity, and Coupa (COUP).
WHAT'S NOTABLE: On Wednesday, Raymond James analyst Michael Turits also raised his price target for Microsoft to $192 from $162, while keeping a Strong Buy rating on the shares on continued "strong" secular trends in terms of the shift of workloads to hyperscale cloud and positive near-term checks. Turits told investors that his checks were "strong" this quarter, with large North American Value Added Resellers and distributors mostly above plan and seeing high teens to greater than 20% growth. The analyst added that the biggest improvement he heard was that resellers were seeing an uptick in E3 to E5 conversions, which is getting a boost from increased interest in collaboration and integration of Microsoft Teams and from security including EMS, Azure Active Directory and Azure Sentinel.
PRICE ACTION: In afternoon trading, shares of Microsoft are fractionally up to $166.12.