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Why Microsoft may really be worth $1,300,000,000,000

Brian Sozzi
Editor-at-Large

The Microsoft freight train keeps rolling right on through the Dow 30.

Microsoft’s (MSFT) stock popped 2% on Friday following another much better-than-expected quarter. For the fiscal fourth quarter, Microsoft’s adjusted earnings came in at $1.37 a share versus estimates for $1.21 a share. Total revenue of $33.72 billion topped analyst projections for $32.8 billion.

The tech giant impressed Wall Street thoroughly, which has become the norm under the leadership of CEO Satya Nadella. Microsoft’s Intelligent Cloud sales rose 14%, LinkedIn sales gained 25% and Office Commercial and Cloud sales improved 14%.

Tech geek Nadella gave another upbeat earnings call with analysts, taking care to highlight Microsoft’s increasingly large cloud contract wins with big customers.

Investors were clearly enthused: the solid quarter and upbeat conference call powered Microsoft to a $1.06 trillion market cap. And many around Wall Street think the good times for Microsoft are likely to continue as corporations tap it for cloud services and consumers continue to stay on Windows. The Street also continues to be impressed by Microsoft’s uncanny ability to keep costs at bay while it’s growing so quickly.

“The growth looks really, really good,” CFRA analyst John Freeman said on Yahoo Finance’s “The First Trade.” Freeman — acknowledging the company looks pretty unstoppable right now — said it’s not out of the realm of possibilities that one year from now barring an economic downturn Microsoft is valued at close to $1.3 trillion.

The company’s data center and cloud-based businesses — Office 365, Azure, LinkedIn – are generating at least 50% of Microsoft’s revenue, by Freeman’s measure, which he calls “really impressive.”

In terms of the fundamentals, Freeman said, “Microsoft is hitting on all cylinders now.”

“We still remain in the early days of public cloud adoption, in our view, and expect Microsoft will continue to benefit from its hybrid strength and longstanding enterprise relationships,” wrote Credit Suisse analyst Brad Zelnick. The analyst maintained his outperform rating and $155 price target on Microsoft.

Brian Sozzi is an editor-at-large and co-host of The First Trade at Yahoo Finance. Follow him on Twitter @BrianSozzi

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