Part of that vision, according to Ives, centers on Microsoft's Office 365 and cloud strategies.
"Everything we see in cloud really signifies a turnaround," he said. "We could view a $4 billion to $5 billion revenue stream."
Nadella's mobile strategy, including the decision to offer free Windows on mobile devices smaller than nine inches, could be another positive catalyst, Ives said.
"What he's starting to do on mobile, and the turnaround, we could see an incremental 40 cents to annual earnings, and that gets us incrementally positive on the name," he said.
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Ives' boldest call focused on Microsoft's future in the handset market. "I think they could go from 2 percent market share to 10 percent. … Nokia is the X variable," he said.
Microsoft was the second-best performer in the Dow Jones Industrial Average on Tuesday, helped along by FBR Capital's upped rating and price target.