Microsoft Teams is benefiting from some of the same factors that drove the spectacular July-quarter financial performance at Zoom Video Communications, writes Evercore ISI’s Kirk Materne.
Jeenah Moon/Getty ImagesMicrosoft shares are poised to set a record closing high Wednesday, with the company’s market valuation now well north of $1.7 trillion and the stock up 47% for the year to date.
Giving the stock an extra boost, Evercore ISI analyst Kirk Materne on Wednesday repeated his Outperform rating on Microsoft stock (ticker: MSFT), upping his target price to $250 from $225. The analyst’s note is focused on Microsoft’s Teams communications platform, which he writes is benefiting from some of the same factors that drove the spectacular July-quarter financial performance at Zoom Video Communications (ZM).
Materne argues the opportunity for Teams is underappreciated. “While it is still early days in terms of customers fully understanding the power of the Teams platform, in a few years, we expect Teams could be to the broader [Productivity and Business Processes] business unit what Azure is to the Intelligent Cloud business unit today,” he writes.
Materne’s note follows a discussion on the trends around Teams with Jared Spataro, a Microsoft corporate vice president who handles marketing for the business. He came away from the meeting with the view that Teams is a platform, not just a collaboration tool. “While customers may start using Teams for chat or meetings, there is a broader suite of up-sell opportunities that come along with the platform in terms of telephony, data management, and security functionality,” Materne writes.
He also believes there is an opportunity for Teams to take market share from companies with more narrowly focused offerings in communications, “given the advantages associated with an integrated platform.” And he writes that Teams “gives Microsoft the opportunity to discuss its broader cloud strategy from the front office to the back office with customers, which helps differentiate Microsoft versus other vendors that might only participate in one part of the broader cloud market.”
Microsoft is up 1.6%, at $230.86, in recent trading. The S&P 500 is up 0.9%.
Write to Eric J. Savitz at eric.savitz@barrons.com
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