There could be a 2% upside to Microsoft’s (NASDAQ:MSFT) stock due to higher than expected margins for the company’s Windows server and SQL server business. Over the past week, Trefis members have created forecasts for two key drivers of Microsoft: (1) Windows’ Market Share of Global Servers and (2) Windows Server & SQL Server Operating Margin.
The member forecasts suggest that Windows’ Market Share of Global Servers will trend in line with the estimates of the in-house team of analysts at Trefis, while Windows Server & SQL Server Operating Margin will trend higher. Microsoft competes with Google (NASDAQ:GOOG) and Apple (NASDAQ:AAPL) in the PC operating system market. We currently have a Trefis price estimate of around $28 for Microsoft’s stock, about 14% above the current market price of around $25.
Since Windows Server & SQL Server constitute only around 8% of Microsoft’s stock, the impact of drivers like (1) Windows’ Market Share of Global Servers and (2) Windows Server & SQL Server Operating Margin is limited. Below are charts showing recent estimates created by Trefis members for the two drivers in detail.
1. Windows Market Share of Global Servers
The average of Trefis member forecasts for Windows Market Share of Global Servers indicate a decrease from around 97% in 2010 to 94% by 2016, mostly in-line with the baseline Trefis estimate of a decrease from 96.5% in 2010 to 93.5% by the end of the Trefis forecast period. The member estimates imply a small upside to the Trefis price estimate for Microsoft’s stock. In the past, Windows’ Market Share of Global Servers has been around 97%.
Disagree? You can drag the forecast trend-line above to express your own view, and see the sensitivity of Microsoft’s stock to Windows’ Market Share of Global Servers.
Our complete analysis for Windows’ Market Share of Global Servers is here.
2. Windows Server & SQL Server Operating Margin
The average of Trefis member forecasts for Windows Server & SQL Server Operating Margin indicate an increase from 30.5% in 2010 to around 34% by 2016, compared to the baseline Trefis estimate of an increase from around 28% in 2010 to 31% by the end of the Trefis forecast period. The member estimates imply an upside of 2% to the Trefis price estimate for Microsoft’s stock. In the past, Windows Server & SQL Server Operating Margin has increased from around 34% in 2007 to 38% in 2009.
Disagree? You can drag the forecast trend-line above to express your own view, and see the sensitivity of Microsoft’s stock to Windows Server & SQL Server Operating Margin.
