Cloud Hosting

If you look at a multiple-year chart of Microsoft (NASDAQ:MSFT) stock, youll see a very pretty geometric shape known as a parabola. More accurately, youll only see the part of the parabola that goes vertically upwards, as the other side of the parabola (the one that goes down) is completely missing.

Source: VDB Photos / Shutterstock.com

Thats all fine and good, but does it make sense to buy Microsoft stock at this lofty price? If you want reasons I can give them to you, but the most compelling reason might be Microsofts progress in cloud computing; this alone could justify ignoring the sky-high MSFT stock price and taking a position anyway.

If youre looking for a company that will pose a threat in the cloud race, you wont find anything much better than Microsoft. In the first fiscal quarter of 2020, Microsofts Intelligent Cloud revenue advanced by 27%, with the Azure division expanding by an astonishing 59%. Thats quite an achievement considering the companys fourth-quarter cloud segment growth was 19% and its fiscal year 2019 cloud division growth was 21%.

You can feast your eyes on those encouraging stats, but its more important to appreciate how pivotal cloud computing will be in the coming years. Just as Microsoft was a desktop-computing pioneer in the 1980s and 1990s, the companys reminding stakeholders than an old dog can do new tricks as it continues to rivalAmazon (NASDAQ:AMZN) in the cloud-computing space.

How big is Microsofts footprint in this market? Put it this way: the companys Azure platform is currently being used in 54 global regions, while Amazons AWS could-computing platform is only being used in 25. Again, investors only need to look at the numbers and the choice is crystal clear.

The characters in the mob filmThe Godfather talked about how youre supposed to separate your business from your personal matters, but Amazon founder Jeff Bezos might have forgotten that lesson. At least, he seems to be taking it personally that the Pentagon awarded Microsoft a coveted $10 billion cloud computing contract.

The fact is, the Pentagon needed a provider with hybrid-cloud experience, and Microsoft trumps Amazon in that respect. Microsofts Azure platform allows for on-premise servers as well as pure cloud computing; during the Pentagons contract negotiations, surely the government took into consideration that Microsoft has a sizable head start in the hybrid-cloud space.

This head start has clearly paid off, as 95% of Fortune 500 companies are currently using the Azure platform. The flexibility of the hybrid approach is indubitably the differentiator here: as one Fortune 500 client observed, Microsoft didnt ask us to bend to their vision of a cloud.

As you may have already heard, there have been suggestions that the Pentagons choosing Microsoft was politically motivated. Theres no need to explore that here, but we can say with confidence that the storys not likely over. I fully expect Jeff Bezos to strike back against the government, Microsoft, and any other perceived antagonist.

Whether Microsoft won the Pentagon contract fair and square is immaterial for the time being, though; what matters to investors is that the companys miles ahead and will likely stay that way for the foreseeable future.

Your best strategy as an investor is to avoid the flashy headlines and the accusations and just stick to the facts. In this case, the facts are evident: MSFT stock had a strong year and the cloud had something to do with that. I expect another exciting and prosperous year to await Microsoft shareholders the share price is high, but the cloud can take it even higher.

As of this writing, David Moadel did not hold a position in any of the aforementioned securities.

See original here:
Microsoft Stock Is Floating on a Cloud - Investorplace.com