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Microsoft shares hit another record as Cowen analysts predict it will hit 25% cloud market share

Key Points
  • Microsoft climbed as high as $139.22 on Thursday after Cowen initiated coverage of Microsoft with an outperform rating and a $150 price target.
  • Cowen analysts expect Azure will increase its market share in cloud infrastructure and platform services to 25% in fiscal 2025 from 13% in the current 2020 fiscal year.
Satya Nadella, CEO of Microsoft Corp.
Justin Solomon | CNBC

Microsoft's stock keeps breaking records, and analysts at Cowen see further gains ahead.

The firm initiated coverage of Microsoft on Thursday with an outperform rating and a $150 price target. The stock rose about 1% to as high as $139.22, after closing at an all-time high of $137.85 on Wednesday. The average price target among analysts tracked by FactSet is $144.31.

In their note to clients, Cowen's Nick Yako and Carson Sippel said that Microsoft has growth opportunities ahead from its Azure public cloud and Office 365 productivity suite. In the past several months Microsoft reclaimed the title of world's most valuable public company, with a market capitalization above $1 trillion, following its transition to a more subscription-oriented business model.

The analysts see cloud products becoming a larger part of Microsoft's revenue mix in the years ahead, particularly as it takes market share in infrastructure, which entails raw computing and storage resources for storing data and hosting applications, as well as by providing more services for application deployment. In the cloud infrastructure market, Microsoft trails Amazon Web Services, but it benefits from having a large base of customers using its traditional on-premises products who are now moving some workloads to the cloud.

"We believe MSFT's hybrid approach will continue to resonate with customers who want to migrate at their own pace," Yako and Sippel wrote.

They predict Microsoft's revenue in cloud infrastructure and platform services will increase 39% a year to $49.1 billion in fiscal 2025, up from $9.6 billion in fiscal 2020, pulling its market share up to about 25% from roughly 13%.

Azure is part of the Commercial Cloud metric (which also includes Office 365, the Dynamics 365 cloud-based enterprise software and commercial services from LinkedIn) that Microsoft discloses each quarter. The analysts see Commercial Cloud as the major contributor of growth and expect it to provide almost 60% of Microsoft's total revenue in the 2025 fiscal year, up from about 30% currently.

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