Microsoft (MSFT) could easily go hunting for another whale of an acquisition with its $130.6 billion in cash, analysts say.
It has a lot of options on where it could look.
“There are lots of different areas that we think Microsoft could acquire. We think Microsoft will continue to be acquisitive. I think there is plenty of opportunity for them to continue to expand their cloud application footprint. If you think about it, they have less than 10% market share in front office applications. They have over 80% market share in middle office productivity tools, but less than 10% share in back office as well,” said Piper Sandler Brent Bracelin on Yahoo Finance Live. “We wouldn’t be surprised if they went after consumer oriented opportunities out there that bolsters advertising as well.”
Microsoft’s last major deal came earlier this year, a nearly $20 billion outlay to scoop up speech recognition company Nuance.
Besides the lofty cash levels, the Microsoft bulls (and there are many on the Street) had other reason to be impressed yet again on earnings day.
Sales for Microsoft’s Azure increased 48% on a constant currency basis in the fiscal first quarter, quicker than the 45% seen in the fourth quarter. Operating profit margins rose 200 basis points from a year ago to 44.7%. Sales from Microsoft’s Windows OEM basis clocked in with 10% constant currency growth, compared to a 3% drop in the fourth quarter.
Microsoft shares surged 5% to a record high of $325.83 in afternoon trading on Wednesday.
Most analysts agree that Microsoft’s fundamental momentum makes the stock a Buy, even as it hovers around new heights.
“Microsoft’s durable growth portfolio of (Azure, PowerApps, Security and Teams) remain growth drivers with long runways ultimately supporting sustainable double-digit rev growth,” said Jefferies analyst Brent Thill in a research note to clients.
Thill reiterated a Buy rating on the stock with a $375 price target.