Microsoft (MSFT) is well positioned to grow its share of enterprise spending on information technology even as overall IT budgets decline this year, investment bank Morgan Stanley said Thursday. Microsoft stock notched a record high on the news.
Based on a second-quarter survey of chief information officers, Morgan Stanley expects IT budgets to fall 4.4% this year. It surveyed 100 chief information officers in the U.S. and Europe for the latest report. Some 83% of those surveyed have downwardly revised their IT budgets based on the impact of the Covid-19 pandemic.
“This represents the first expected IT budget decline in over 10 years, and the lowest level recorded in the history of our CIO survey,” the firm said in a note to clients.
The latest survey is a sharp contrast to the results of the firm’s first-quarter survey. After the first-quarter survey, Morgan Stanley projected 2020 IT budgets would grow 3.5%.
Microsoft Stock Called ‘Top Pick’
Despite the downturn, Microsoft is seen bucking the trend, Morgan Stanley analyst Keith Weiss said in a separate report.
“Survey results highlight Microsoft’s ability to capitalize on both near- and long-term opportunities, despite indications for 2020 budget contraction across broader software and overall IT,” Weiss said.
Microsoft is benefiting as companies prioritize projects related to digital transformation, cloud computing, security and collaboration, he said.
Weiss maintained his “top pick” buy rating on Microsoft stock. He also raised his price target to 230 from 198.
On the stock market today, Microsoft stock rose 0.7% to 214.32. Earlier in the session, Microsoft stock hit a record high of 216.38.
Software Giant Holding Strong In Covid Pandemic
Elsewhere on Wall Street, Wedbush Securities analyst Daniel Ives reiterated his outperform rating on Microsoft stock. He also increased his price target to 260 from 220. Plus, he kept Microsoft stock on the firm’s “best ideas” stock list.
Microsoft’s cloud computing businesses have held strong during the Covid-19 pandemic as enterprises have shifted to a work-from-home environment, Ives said in his note to clients.
The tech giant’s two main cloud products are Azure infrastructure services and Office 365 productivity software.
“Microsoft’s Azure/Office 365 product portfolio is holding up extremely well in this Category 5 storm,” Ives said. A forecast economic rebound in the third and fourth quarters should further fuel those products, he said.
“We believe Azure’s cloud momentum is still in its early days of playing out within the company’s massive installed base,” Ives said. Plus, the Office 365 transition for both consumers and enterprises will provide growth tailwinds for the next few years, he said.
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Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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