Wedbush analyst Dan Ives believes Microsoft’s Office 365 price hike could boost the stock price as much as 18%.
Microsoft announced price hikes for Office 365 of $1 to $2 per month. While relatively minor, when factoring in hundreds of millions of users, Ives believes the price hike could contribute up to $5 billion in revenue, according to Business Insider.
As a result of the move, Ives has raised his price target from $325 to $350 a share.
“The Office 365 price increase for 2022 was a smart strategic poker move that could be another $5 billion+ incremental tailwind for Redmond in 2022, giving more confidence that numbers could continue to move up higher looking ahead,” Ives said.
Ives reiterated a position he has taken in the past, that Microsoft is uniquely positioned in the cloud market to make major gains moving forward.
“Microsoft remains our favorite large cap cloud play and we believe the stock will move higher into year-end as the Street further appreciates the cloud transformation story in Redmond,” Ives concluded.
Wedbush Securities has raised Microsoft’s target price from $310 to $325 after the company became the third to cross the $2 trillion mark.
Microsoft made headlines yesterday when it became only the third company to have a market capitalization of $2 trillion, behind Saudi Aramco and Apple. The company has been firing on all cylinders in recent years, thanks to the leadership of CEO Satya Nadella.
Wedbush has been bullish on Microsoft for some time, largely on the strength of its cloud platform. The firm is once again raising its price arget following yesterday’s news, from $310 to $325 per share.
“While many tech stocks overall are all being lumped together as part of the WFH trade, we believe the growth story at Microsoft is not slowing down as more enterprises/governments head down this cloud path over the coming years,” Wedbush analyst Dan Ives wrote, via TheStreet.
TheStreet’s Jim Cramer echoed those sentiments, believing Microsoft’s shares are still undervalued. He said the company “has moved up on a delayed action to its great quarter. It remains inexpensive despite its historic growth rate and its consistency. And do I care that [CEO Satya Nadella] was named chairman? Hey, listen, we have stocks that go up like that, naming guys chairman every day of the week.”
On its opening day, Coinbase soared above its initial reference price of $250 a share, hitting as high as $429.54 before settling down.
Coinbase is one of the leading platforms for trading cryptocurrency, and its success is inextricably tied with the crypto market. It’s off to a good start however. It opened trading at $381 a share, 52% above its reference price.
Despite soaring to 72% above reference to $429.54 during its first day, it closed at $328.28, or 14% below its opening trade.
Jim Cramer, founder of TheStreet had high praise for Coinbase, calling it “the real deal,” saying if you’re a “big believer in cryptocurrency … you want to own Coinbase for the long haul.”
TheStreet also quoted Wedbush analyst Dan Ives on the significance of the Coinbase IPO.
“The Coinbase IPO is a watershed and historical event for the crypto industry and will be something the Street will be laser focused on to gauge investor appetite going forward,” Ives said.
Tesla is poised to become the next $1 trillion company, thanks to potential demand in China, according to one analyst.
Tesla has been growing at an incredible pace, recently passing Facebook as the fifth most valuable US company. China has been a big part of that growth, helping it nearly hit its goal of shipping 500,000 vehicles in 2020.
According to Wedbush’s Dan Ives, China’s demand for electric vehicles will likely propel Tesla to its next milestone, shipping one million units in a year.
“If China stays on its current path for Tesla, Musk & Co. could hit one million delivery units globally by 2022. This speaks to our thesis that Tesla will hit a trillion dollar market cap in 2021 despite this risk-off moment for EV stocks with the bears coming back to life after a long hibernation in their caves over the past year,” Ives said.
As part of its meteoric rise, Ives believes Tesla will pass the $1 trillion market capitalization threshold in 2021, making it one of only a handful of companies to do so.
Just four weeks after saying Microsoft has “unparalleled” cloud advantages, Wedbush has raised its target price from $260 to $270.
Microsoft has been making moves in the cloud industry, outpacing the industry’s growth rate and posing an ever bigger challenge to AWS. In particular, the company’s vast installed base give it a huge advantage in the cloud market, as existing customers have a sense of familiarity with the company’s products and ecosystem.
On the verge of Microsoft’s earnings on Tuesday, Wedbush analyst Dan Ives said the remote work environment is also working to boost Microsoft Azure, according to Business Insider.
“This current work-from-home environment is further catalyzing more enterprises to make the strategic cloud shift with Microsoft across the board with Azure growth remaining brisk,” Ives said in a note to clients.
Wedbush has raised its target to $270, but see $300 per share as a distinct bull-case possibility. According to BI “Ives estimates that Microsoft has only met 35% of the market for its cloud product and that permanent telework will accelerate other companies’ deployments of cloud-computing deals.”
The report is good news for Microsoft as all eyes look to its earnings report Tuesday.
Dan Ives, Wedbush Senior Technology Analyst, is bullish on Microsoft thanks to its “unparalleled” advantages in cloud transition.
Microsoft’s Azure platform is currently in second place in the cloud market, behind AWS. In spite of that, Azure has been growing rapidly, outpacing the market at large. In particular, Microsoft has been making headway at the expense of AWS and third-place rival Google Cloud.
Ives doesn’t see that stopping, thanks to the unique position Microsoft is in, in combination with continued work-from-home trends.
“Deal flow looks strong heading into the rest of FY21 as we estimate that Microsoft is still only ~35% through penetrating its unparalleled installed base on the cloud transition,” Ives said, according to Markets Insider. “To this point, we believe Azure’s cloud momentum is still in its early days of playing out within the company’s massive installed base and the Office 365 transition for both consumer/enterprise is providing growth tailwinds over the next few years.”
As a result of these factors, Ives sees the company’s stock hitting $260 per share next year, an increase of 16% over the current price.
“From a valuation basis, even if we take a 10%+ haircut to the cloud and enterprise growth drivers, we are still looking at what we value as a $1 trillion valuation cloud franchise for Redmond,” he added.
Demand for Teslas in China could help push the company over its 2020 goal of selling 500,000 vehicles, according to one analyst.
Many were skeptical that Tesla could achieve the goal it set for itself when it announced it was planning on shipping 500,000 vehicles in 2020. Undeterred, the company reiterated its goal during its third-quarter earnings call.
According to Business Insider, Wedbush Securities analyst Dan Ives believes China is the key to Tesla’s goal. In November, Tesla sold some 22,000 vehicles in China. If that demand continues in December, it should be enough to push the company past the 500,000 mark.
“We believe the company is tracking to another strong month of December in China which could be the tipping point to get Musk & Co. to hit/exceed its 500k annual delivery target, an achievement not even on the map for the Street going back to the late spring/summer timeframe,” Ives said.
Ives believes Teslas stock could increase as much as 56% to $1,000 a share, in part as a result of China’s demand.
“The China growth story is worth at least $100 per share in a bull case to Tesla as this EV penetration is set to ramp significantly over the next 12 to 18 months, along with major battery innovations coming out of Giga 3 and elsewhere throughout the China EV supply chain,” Ives added.
“What we’re expecting is that other states might have otherwise been teed up to try to replicate AB5,” says Lyft’s Chief Policy Officer Anthony Foxx. “What we want to do is engage in discussions with leaders of states who maybe had considered that and to try to talk about a different model, a different way to pursue what we all want. We want to make sure that the drivers are well taken care of, not only when they’re driving but before and after. Also, we want to make sure there’s clarity and certainty in this industry so that it’s not living under a cloud.”
California Assembly Bill 5 (AB5), was overturned by the people in regards to ridesharing with the passage of Proposition 22 Tuesday. AB5 was passed by the Democrat-controlled state legislature and signed by California Governor Gavin Newsom in September 2019 as a favor to both the taxi industry and unions who heavily finance Democrat campaigns. AB5 required companies that hire independent contractors to reclassify them as employees. The bill would have made it financially impossible according to Uber and Lyft for them to operate in California. Unfortunately, Proposition 22 did not change AB5’s ban on independent contractors in other industries.
Lyft’s Chief Policy Officer Anthony Foxx Hopes To Finally End ‘Living Under a Cloud’
“This was massive in terms of almost an existential business risk to these models in terms of the gig economy,” says Dan Ives of Wedbush Securities. “It could have been a $500 million incremental expense to Uber a $150 million for Lyft. In my opinion, they’re really popping the champagne today because this was really a best-case outcome. It was a dark cloud over the gig economy in these stocks and I think worth potentially 15 to 20 percent to ultimately where I see the valuations.”
“What was really the crux of the issue is the worry of the street that this was going to be a pandora’s box situation, a ripple effect across cities and states,” added Ives. “The fact that the voters in California approved this was really a seminal moment. From the beginning, really the last year and a half, it’s been a head-scratcher in terms of what this could have done not just to the gig economy. Of the hundreds of drivers that we’ve talked to, 95 percent of them were against the AB5. This is definitely a sigh of relief early this morning for investors as well as for the drivers themselves.”
Dan Ives: This was an existential business risk to these models in terms of the gig economy.
With Apple expected to release four 5G iPhones in 2020, at least one analyst is expecting it to be a “supercycle” for the company’s stock.
Wedbush analyst Dan Ives told CNBC he believes the demand for 5G iPhones will have a significant impact on the stock price. As a result, Ives raised his target for Apple’s stock to $350, a significant increase over the $284 closing price Monday.
As CNBC points out, recent Piper Jaffray research shows an increasing level of interest in upgrading to a 5G iPhone, with nearly a quarter of iPhone owners willing to upgrade to a $1,200 model.
With interest that high, it’s little wonder some reports predict Apple will sell 80 million units in 2020, with at least one source placing that number as high as 100 million. Similarly, Strategy Analytics predicts Apple will easily take the 5G crown in 2020, leap-frogging the competition to take the top spot.
Even so, not all analysts share Ives’ bullish outlook. Gene Munster, Loup Ventures managing partner, told CNBC that the first year of 5G iPhones would be a “disappointment for investors,” blaming poor coverage on the part of the carriers.
With such different viewpoints in play, 2020 is shaping up to be a fascinating year for Apple and their 5G plans.
The key to Apple’s success is to execute on China, execute on the iPhone and to continue to grow its services business according to Dan Ives, an analyst at Wedbush. Ives believes that the Apple services business when you look at the sum of its parts is undervalued and should add an additional half a billion dollars to Apple’s valuation over time.
Dan Ives, Managing Director and Equity Analyst covering the Technology sector at Wedbush, talked about why they believe services growth at Apple will make the company worth $1.5 trillion:
Services is the Linchpin For Apple
In our opinion services is the linchpin. When you look at it from a sum of the parts, services, we think that business alone is about half a trillion, call it $450 billion dollars. That’s really what the street now is starting to reanalyze that and the multiple continues to expand. In our opinion, the iPhone product cycle continues to be there.
It’s really about can they hit $50 billion (from services) in the next year and a half from a revenue perspective? With the sum of the parts, they’re able to do that and then you can start to justify that services business. When you add up the sum of the parts, the core iPhone business is worth about a trillion and then half a billion for the service.
China is the Fuel in the Engine
China is the fuel in the engine. Fundamentally, we don’t get to a trillion and a half (valuation) or even a stock that goes higher here if China is not a significant growth catalyst. We see about 60 or 70 million iPhones coming up for an upgrade cycle in China and we believe about 50 to 60 percent of those do get upgraded.
I think without the services they’re a teenager in terms of where they’re gonna trade. I think the services business is how they start to get that re-rating from 20-22 times earning. That’s why right now for Cook and company it’s really about not making a bad strategic move on the content side or MNA. It’s really just executing on China, execute on the iPhone strategy, and services, that’s front and center.
China is Also a Potential Pitfall
A potential pitfall is China, just given what we’re seeing in terms with trade and tariffs. Can there be a supply chain disruption and really specifically, can consumers start to digest that higher price point with the lower competition?
