Microsoft – The Cloud Winner

Microsoft has emerged from its transition to the cloud better than most peers; the company is extremely well-positioned to gain share as cloud adoption ramps. This positions the company to gain “share of wallet” within IT budgets, while expanding margins. Valuation appears fair relative to growth prospects, peers, and history, but we believe MSFT shares offer an attractive combination of growth and defensive characteristics. Key risks to our view include PC demand, the company’s ability to drive continued margin expansion, tough comparisons, and potential for large M&A.