Microsoft, BP Join Forces To Drive Digital Energy And Net Zero Carbon Goals

Microsoft and British oil giant BP have entered into a strategic partnership to digitize energy systems and accelerate net zero carbon goals set by both companies.

As part of the collaboration, Microsoft (MSFT) will deploy its Azure cloud-based solution for BP infrastructure and in turn BP will supply renewable energy to help the tech giant meet its 2025 renewable energy goals.

“BP shares our vision for a net zero carbon future, and we are committed to working together to drive reductions in carbon emissions and fulfil demand with new renewable energy sources,” said Microsoft’s Judson Althoff. “A strategic partnership such as this enables each organization to bring its unique expertise for industry-leading change and the potential to positively impact billions of lives around the world.”

Earlier this year, BP (BP) announced its goal to become a net zero emissions company by 2050 or sooner, and to help the world reach net zero levels. By the end of the decade, the company seeks to develop around 50 gigawatts of net renewable generating capacity – a 20-fold increase on what it has previously developed, increase annual low carbon investment 10-fold to around $5 billion and cut oil and gas production by 40%.

Meanwhile Microsoft in January set out a target to be carbon negative by 2030 and remove more carbon from the environment than it has emitted since its founding by 2050.

As part of the partnership, Microsoft and BP have signed a framework agreement for renewable energy projects that aims to provide renewable energy to help power Microsoft’s datacentres. As such, BP will supply renewable energy to Microsoft across multiple countries and regions including the US, Europe and Latin America. The agreement is targeted to help Microsoft’s reach its 100% renewable energy goal by 2025.

Shares in Microsoft have gained about 30% so far this year as the tech giant continues to benefit from increased demand for remote services and cloud solutions during the coronavirus pandemic. (See Microsoft stock analysis on TipRanks)

In a bullish outlook, Morgan Stanley analyst Keith Weiss last week raised his price target to $245 (19% upside potential) from $230 and reiterated a Buy rating, saying that he sees room for a 10+% quarterly dividend increase in the coming weeks to 56 cents per share from 51 cents.

“Combined with mid-teens EPS growth, the supports [Microsoft’s] premium total return profile, a durable and attractive level in uncertain times,” Weiss wrote in a note to investors adding that Microsoft historically announces dividend hikes in mid-September.

Overall, Wall Street analysts have a bullish outlook on the stock. The Strong Buy consensus scores 26 Buy ratings versus 3 Hold ratings. The average price target of $230.14 still implies another 12% upside potential over the coming year.

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