Microsoft’s (MSFT) Commercial Cloud Segment Could More Than Triple in Three Years, Says Top Analyst
The rumors were true: Microsoft (NASDAQ:MSFT) has confirmed that it’s buying the code-sharing site GitHub, a developer-focused startup that has become a crucial part of the programming industry, for $7.5 billion. Microsoft is acquiring GitHub because it “will empower developers to achieve more at every stage of the development lifecycle, accelerate enterprise use of GitHub, and bring Microsoft’s developer tools and services to new audiences.”
KeyBanc’s top analyst Brent Bracelin commented, “The Bloomberg article “Microsoft Will Acquire Coding Site GitHub” suggests that there is a new strategic battle brewing within the large cloud titans that have aspirations to capture the mind share of millions of developers that are either building cloud-native applications or refactoring legacy applications to run in public clouds. We see 2018 shaping up as the year that the cloud wars shifts from a platform “feature” battle toward a developer-first, “automation” battle that we highlighted in an AWS note “Automation Is the Next Cloud Wars Battle” in April. This is further supported by Salesforce’s $6.5B acquisition of MuleSoft as another example of a cloud titan enhancing its position with developers through an application-integration platform. The appeal of GitHub is clear given its leading position with developers as a software code repository and sharing platform that has quickly scaled in the last decade to 27 million developers and 80 million repositories.”
Bottom line: “The confirmation of a Microsoft-GitHub acquisition would strengthen our view that the Microsoft commercial cloud segment could more than triple to $50B+ in three years vs. $15B in FY17.”
Net net, Bracelin rates MSFT an Overweight with a price target of $110, which represents a potential upside of 8% from where the stock is currently trading.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, 5-star analyst Brent Bracelin has a yearly average return of 21.2% and a 76% success rate. Bracelin has a 35% average return when recommending MSFT, and is ranked #35 out of 4817 analysts.
How does Bracelin’s bullish bet weigh in against the Street? It appears the analyst is not the only one enthusiastic on this chip giant’s prospects, with TipRanks analytics demonstrating MSFT as a Strong Buy. Out of 18 analysts polled in the last 3 months, 16 are bullish on Microsoft stock while 1 remains sidelined, and 1 is bearish. With a return potential of nearly 10%, the stock’s consensus target price stands at $111.06.