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Were taking a look at all 30 stocks in the Dow, starting with the worst performerWalgreens Boots Allianceand working our way up to the highest-flying stock in the benchmarkApple.

Microsoft keeps on rolling. In 2019, the company continued its transformation from legacy software vendor to cloud giant.

Microsofts (ticker: MSFT) cloud traction is a big reason why its shares have significantly outperformed the market in 2019. The tech giants shares have risen 55% in 2019 amid investor enthusiasm over the companys Azure cloud-computing business and its success in selling software subscriptions such as Office 365.

Cloud computing is one of the rare spending categories that can do well even in a lackluster economic environment. Companies are shifting huge sums of their technology spending to the cloud because it offers better reliability, an easier path to scaling up, and greater cost efficiencies versus traditional on-premises computing equipment.

According to Gartner, Amazon Web Services was number one in public cloud computing services with a 47.8% market share in 2018, followed by Microsoft at 15.5%, and Alibaba Group Holding (BABA) at 7.7%. Alphabets (GOOGL) Google and IBM (IBM) are a distant No. 4 and No. 5, with 4% and 1.8% of the global cloud market, respectively.

But Azure sales grew 59% year-over-year in its most recent quarter, versus a growth rate of 35% for Amazon Web Services. Those data points suggest that Microsoft is gaining ground in the cloud race.

Microsoft is also winning the big deals too. In October, the Defense Department said Microsoft was awarded a cloud-computing contract worth up to $10 billion over 10 years if all options are exercised. Microsoft beat out Amazon Web Services. Analysts are now enthusiastic that Microsofts win could set the stage for a wave of other large deals with enterprises and the government.

In late October, Microsoft crushed earnings expectations for its September quarter, citing its cloud segment. The worlds leading companies are choosing our cloud to build their digital capability, CEO Satya Nadella said in a statement at the time.

As a result, Wall Street analysts are optimistic on Microsoft will outperform again in 2020, with 91% having a Buy or Overweight rating on the company, according to FactSet. The average analyst price target for Microsoft is $164.76.

Write to Tae Kim at tae.kim@barrons.com

Link:
Microsoft Stock Soared in 2019. Heres Why It Could Continue to Outperform This Year. - Barron's