CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
US English

Microsoft share price forecast: significant growth but at what price?

By A.G.

17:39, 19 August 2020

Microsoft stock forecast

Microsoft: recent technology trends and news

Microsoft (MSFT) needs no introduction. We all know what Windows, Microsoft Office and Surface products are. However, the company has changed significantly in recent years.

Under the guidance of its current CEO, Satya Nadella, Microsoft shifted focus to services and software, and particularly to growing its cloud business. In the Covid-19 environment, these changes have positioned the business to be a major beneficiary. Since the beginning of the year, Microsoft share price trend has been bullish, up 31 per cent by the time of writing, August 17, outperforming the broader market.

Microsoft share price forecast

The last several months have made it abundantly clear that digital technology is crucial to business success and, in some cases, survival. Companies that can build out their digital capabilities have been more resilient during the crisis and will come out of it more robust.

Examples like curbside food pickup, contactless shopping and telemedicine are all powered by technology, cloud and AI. With technology spending as a percentage of GDP expected to double in the next decade, Microsoft is well positioned to capture that growth.

Another trend that supports our Microsoft stock analysis is entertainment, and particularly gaming, as people everywhere turned to gaming to connect, socialise and play with others during Covid-19 lockdowns. While we may not usually associate Microsoft with gaming, its Xbox hardware, Xbox Game Pass and Minecraft have seen tremendous engagement and interest during the pandemic.

Besides, the latest research shows that gaming time is up around 40 per cent during the pandemic and that a growth rate of approximately 14 per cent over pre-pandemic usage can be sustained. Gaming is also much more diverse than most people realise, with an average age of 37 and 45 per cent female gamers. Compared to a decade ago, graphics, gameplay, characters and storylines are much better today.

What is your sentiment on AMZN?

Vote to see Traders sentiment!

Microsoft share price forecast: does TikTok matter?

Potentially the biggest story in technology over the last few weeks has been the fate of TikTok's US operations. TikTok's parent company, ByteDance, has 90 days from August 14 to divest the US business or it will be completely shut down by the US government.

Microsoft has been in talks with ByteDance since early August and many analysts believe that it's the only American company capable of handling this acquisition. Facebook (FB), Alphabet (GOOGL) and Amazon (AMZN) all face multiple antitrust investigations into their business practices and are unlikely to receive US government's approval to buy TikTok. The main challenge of this acquisition is a technical one, as 15 million lines of software code, responsible for Tik Tok's artificial intelligence, have to be transferred to the US. ByteDance, for example, has 10,000 software engineers and, according to the negotiations with the US government, it might take Microsoft a year to safely transfer the code.

According to the Wall Street Journal, TikTok has 100 million US users and internal projections show revenues of $1 billion this year and $6 billion projected for next year. While the value of the deal hasn't been discussed yet, Microsoft is in a good position as the only viable buyer. In more recent MSFT stock news, Fox Business News reported that Microsoft is also interested in TikTok's UK unit if ByteDance chooses to sell.

Amid all the speculation, it's unclear what Microsoft will do with TikTok if it does end up acquiring it. For example, in the case of LinkedIn, Microsoft hasn't been able to monetise that asset effectively outside of selling ads. Monetising the 100 million TikTok users through ads is undoubtedly an option, and would affect our Microsoft stock predictions. However, some analysts argue that Microsoft might be buying TikTok to bolster its Azure cloud business as TikTok would become their biggest customer overnight.

Q2 result: is MSFT stock a buy or sell now?

Microsoft stock performance in 2020 and over the last year has been impressive as it continued to benefit from the growth in its cloud business. Shift to remote work amid the Covid-19 pandemic only reinforced the strong tailwinds helping the company.

Microsoft share price performance


0.62 Price
-6.900% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 22:00 (UTC)
Spread 0.01168

Oil - Crude

71.62 Price
+0.290% 1D Chg, %
Long position overnight fee -0.0212%
Short position overnight fee -0.0007%
Overnight fee time 22:00 (UTC)
Spread 0.030


41,155.05 Price
-6.310% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 22:00 (UTC)
Spread 106.00


1,981.82 Price
-1.140% 1D Chg, %
Long position overnight fee -0.0201%
Short position overnight fee 0.0118%
Overnight fee time 22:00 (UTC)
Spread 0.30

According to the latest Microsoft share price news, the company delivered a solid result for its fourth quarter, ending June 30, although some analysts were disappointed with the Azure revenue growth rate.

Let’s briefly run through the numbers.

  • The commercial cloud segment surpassed $50 billion in revenue for the first time;

  • Azure revenue grew 47 per cent, lower than 61 per cent growth in the previous quarter. Overall, over the last four quarters, Microsoft closed a record number of multi-million-dollar cloud agreements;

  • Revenue in the personal computing business increased by 14 per cent, which is quite unprecedented. This was driven by the benefit of work, learn and play from home;

  • Gaming was genuinely exceptional for Microsoft, with revenue growth of 64 per cent. It noted increased sales of the Xbox consoles, up 49 per cent, and record engagement during the quarter;

  • And we can’t forget about Microsoft Teams, its competitor to Zoom and other collaboration tools. Users logged more than five billion minutes during the quarter alone Sixty-nine companies have more than 100,000 users on Teams and even the National Health Service in the UK chose Teams to provide collaboration tools to its 1.2 million employees.

On a negative side, LinkedIn was weak, as economic weakness affects hiring and advertising spending.

Microsoft stock price forecast for the rest of the year and beyond

Many analysts are bullish on the company long term. However, MSFT stock forecast suggests a somewhat limited upside over the next 12 months. FactSet consensus MSFT stock price prediction is currently at $231 based on ratings from 32 sell-side analysts.

Microsoft share price forecast

Even though most analysts see a limited short-term upside, 29 of them have a Buy rating on the stock with only three Hold ratings. Dan Ives, the analyst at Wedbush, has the highest Microsoft stock forecast with the price target of $260, while Citi has the lowest target on the street at $208. The range of price targets is quite narrow and there appears to be a consensus that Microsoft is well positioned to benefit from the long-term, structural tailwinds.

The typical bullish MSFT stock analysis centres on the Azure cloud business. The total addressable market for cloud computing is estimated to be $600 billion by 2022. Analysts at RBC believe that Microsoft's "Azure can scale to multiples of its current size". The pandemic is also forcing companies of all sizes to adopt cloud at a much higher rate.

In addition to the cloud, analysts at Macquarie see gaming as the next hyper-growth engine for Microsoft as the gaming market is set to reach $180 billion by 2021. They believe that Microsoft's gaming services powered by Azure put it in pole position to monetise on this growth. Macquarie has recently increased its price target from $215 to $225.

Coupled with more than $20 billion in annual buybacks and dividends, Microsoft is likely to deliver consistent shareholder returns in the coming years.

The bear thesis, although it's hard to find an analyst bearish on Microsoft, seems to be based on valuation. MSFT stock currently trades at 10-11 times sales and almost 31 times earnings. While on the absolute basis these levels are expensive, relative to other mega-cap technology peers, they are in line. Furthermore, many argue that Microsoft deserves to trade at a premium given its long-term growth potential and exposure to secular tailwinds around the future of work and cloud.


Read more: Tesla share price forecast: will Tesla stock go up past ,000?

Markets in this article

Alphabet Inc - A (Extended Hours)
133.65 USD
-1.74 -1.290%
AMZN Inc (Extended Hours)
145.90 USD
-1.73 -1.170%
Meta Platforms Inc (Extended Hours)
325.19 USD
-7.45 -2.240%
Microsoft Corp (Extended Hours)
370.97 USD
-3.09 -0.830%
Microsoft Corp (Extended Hours)
370.97 USD
-3.09 -0.830%

Rate this article

The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
Capital Com is an execution-only service provider. The material provided on this website is for information purposes only and should not be understood as an investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. We do not make any representations or warranty on the accuracy or completeness of the information that is provided on this page. If you rely on the information on this page then you do so entirely on your own risk.

Still looking for a broker you can trust?

Join the 570.000+ traders worldwide that chose to trade with

1. Create & verify your account 2. Make your first deposit 3. You’re all set. Start trading