Microsoft (NASDAQ:MSFT) generates the vast majority of its revenue from its Azure cloud computing platform, Office 365, and is looking to enhance its profile in video games with its pending Activision (ATVI) purchase.
But, the company's next growth engine could be hiding in plain sight, according to investment firm Jefferies.
Analyst Brent Thill, who has a buy rating and a $400-a-share price target on Microsoft's (MSFT) stock, noted that Microsoft's (MSFT) Power Platform could be its next big opportunity, and potentially bigger than Office.
Thill said that revenue from Power Platform is "immaterial" today, but it could have a larger impact on all of Microsoft's (MSFT) products and become a "multi-billion-dollar growth pillar," which he compared to "the early days of Azure."
First unveiled in 2018, Power Platforms allows developers to have a set of tools to build customized low-code apps, automate workflows, generate reports and create chatbots, all designed to improve productivity. It can also integrate with GitHub, which Microsoft (MSFT) bought for $7.5 billion in 2018, as well as Teams, its Slack competitor, owned by Salesforce (CRM).
Charles Lamanna, Microsoft's (MSFT) Corporate Vice President of Business Apps and Platform, said it's likely that over the next five years, 500 million new apps will need to be built, which would be "more than all the apps built in the last 40 years.”
Although 500 million apps over the next five years sounds like an enormous opportunity, there's one big hurdle: there are not enough software developers around the world to meet that demand.
It's estimated that to reach the 500 million figure, an additional 10 years worth of developers would have to enter the market. Given the demand for apps and the shortfall in developers, platforms such as Microsoft's (MSFT) Power Platforms, with its low-code environment, are now a necessity and can transform employees with no development experience into "citizen devs," letting companies transform their businesses, Thill explained.
These newly trained developers can build apps using Power Platform's "PowerPoint-like, drag-and-drop interface with a simple Excel-like coding language," and put all of their workflow onto one platform, making it easier to create apps. This could cut the development time it takes to create apps, while not to mention being significantly cheaper than previous solutions.