Morgan Stanley: Cloud Will Push Microsoft To A $1 Trillion Valuation Within One Year

Morgan Stanley tells clients that Microsoft's cloud portfolio and large customer base make it an attractive investment, even as its market cap climbs.

The power and scope of Microsoft's cloud portfolio, especially its hybrid cloud and AI-infused edge computing capabilities, will propel the software giant to a $1 trillion company within a year, according to a prediction released Monday by investment giant Morgan Stanley.

Keith Weiss, an analyst with the investment bank, set a 12-month price target on Microsoft at $130—almost 50 percent above the $87 share price at market close last Friday.

"Strong positioning for ramping public cloud adoption, large distribution channels and installed customer base, and improving margins," Weiss said in a research note, support a path to $50 billion in earnings for Microsoft and the $1 trillion market capitalization.

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[Related: Microsoft Reports 'Outstanding' Results From Channel Partners As Azure And Office 365 Soar]

Apple, Google parent Alphabet, and Amazon are all vying to become the first company ever to reach the $1 trillion milestone.

Microsoft's advantage comes from the diversity of its portfolio, which encompasses on-premises environments; Azure, the world's second-largest public cloud; and IoT solutions powering the surging number of smart devices and sensors deployed at the edges of networks, according to Morgan Stanley.

The Azure public cloud is positioned for strong growth "in part because of Microsoft’s differentiated view of compute architectures," he said, noting, "Microsoft’s hybrid computing portfolio spans from the 'Intelligent Edge' of distributed computing in the field, back into the strong Azure Cloud platform."

In addition to Azure, Microsoft's data center technology, the Office 365 productivity suite, and integrations of its products with the LinkedIn professional network acquired in 2016 have all contributed to profits once again growing faster than 10 percent, Weiss said.

The Morgan Stanley research note gave a major boost to Microsoft stock, which closed Monday up $6.60 (7.57%) to $93.78 and continued gaining in after-hours trading.