The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.

Summary:

• We all know why Microsoft was forced to build a web browser based on Google’s Chromium code.
• Microsoft desperately needs more people to use its Edge browser.
• Using its rival’s very popular browser universal framework Chromium to build a new version of Edge is smart.
• The more people who use Microsoft software/apps, the better it is for the company’s growing digital advertising business.

A robust advertising business helps fortifies Microsoft’s status as the world’s king of enterprise SaaS.

The Cloud First strategy of Microsoft (MSFT) means it needs a more popular web browser.  Becoming a serious digital service provider is therefore a priority for Satya Nadella.  This explained why Nadella had to build a new version of Edge based on Google’s (GOOGL) Chromium.

Despite more than 800 million Windows 10 users, Microsoft’s Edge still has less than 5.5% market share.  The low adoption of Edge means Microsoft’s search engine and digital display advertising business is not growing fast enough like Google’s and Facebook’s (FB).

Bing Ads remains a small but growing catalyst for MSFT. However, a Chromium-based Edge that can attract up to 20 to 30% global market share can seriously boost Bing Ads’ position as a great alternative to Google AdWords. More people using Chromium Edge can lead to more people using the default Bing search engine.  The more people using Bing as their day-to-day web and mobile search engine, the more customers there can be for Bing Ads.

A More Popular Edge Browser Is A Must For Microsoft

Unlike Google’s massive digital advertising business, Microsoft’s annual advertising revenue is less than $7.1 billion. A cloud computing-centric company like Microsoft right now needs a robust digital advertising business. Advertising (or marketing services) is part of cloud computing.

My fearless forecast is that MSFT can breach $160 by early 2020. This can happen if only it can grow its search and display advertising to a $25 billion/year venture.

The 12-month price targets for MSFT averages out at $124.65. This is because most analysts do not believe Microsoft can become a serious challenger to Google and Facebook’s dominance of digital advertising.

Riding On The Popular Wagon That is Chromium

The current Edge version is based on Microsoft’s proprietary HTML5 engine. By shifting toward the Chromium open framework, the upcoming Edge will likely attract active users. A Chromium Edge browser means it will support browser plug-ins available at Google’s Chrome App Store.

A Chromium Edge means it now also more compatible with Google’s YouTube platform and Google Docs. It was a big handicap that the current version of Edge has trouble playing livestreamed YouTube videos in 720p or

HD 1080p resolution. By building a Chromium Edge, Microsoft’s main browser will now also work flawlessly with Google Apps and Google Docs.

My hands-on tests showed that the developer (preview build) of Chromium Edge has no problem with YouTube and Google Docs. I also tested it and found that this preview build of Chromium Edge can directly install browser add-ons from Google’s Chrome app store.

Chromium Edge can run 1080p full HD YouTube videos without dropped frames, buffering, or freezing.  I also now endorse Chromium Edge as a decent browser for Google Docs. Working on spreadsheets is now error-free using the preview Windows 10 build of Chromium edge.

I am bullish on MSFT because it is building a web browser than can appeal to more people. Attracting more active users (of its browser) can lead to more advertising customers of Microsoft’s Bing Ads platform.

The Other Reason Why Microsoft Need’s Google Chromium

Aside from improving its online advertising business, Microsoft adopted Chromium because it will help it boost its Progressive Web Apps or PWA strategy. PWA is the future of the internet and the mobile web. A PWA developer wants to make web or HTML apps run as native applications when they are viewed/used on smartphones or tablets.

Google is the pioneer in PWA adoption and implementation. Microsoft is an early adopter of PWA. The previous problem was that Google’s PWA implementation is based on its Chrome browser and Chrome Operating System.  Microsoft had no choice but to build a new browser than can seamless run third-party Progressive Web Apps.

The current proprietary Edge browser is therefore going to be obsolete when it comes to Progressive Web Apps. After giving up on its Windows 10 Mobile Operating System, Microsoft’s only recourse is to go all-in on PWA. It is also easier for Microsoft to build around the upcoming PWA revolution than introducing its own version of the open-sourced Android operating system.

Conclusion

Microsoft’s willingness to use or adopt its rival’s technology or platform is another reason to buy more MSFT shares. Nadella is a decisive and fearless leader that is not afraid to hitch Microsoft’s wagon to Google’s Chromium star.  I repeat my 12-month PT for MSFT is $160. This is feasible when you consider that Microsoft really has the enterprise muscle to package its Bing Ads platform with its Azure and Office 365 subscription products.

Microsoft’s willingness to join Google’s own vision for Progressive Web Apps is also a future tailwind for the company. Going forward, PWA will supplant the need for Android and iOS apps. Most mobile developers today will likely develop PWA games and software programs because they run as native apps on mobile devices regardless of operating systems used.

Compared to its peers, MSFT is also not overpriced. Going forward, a software-centric and cloud computing company really deserves to be valued higher than Amazon (AMZN). Unlike Amazon that operates on a low-margin, revenue-first business model, MSFT is a high-margin software company that delivers its products and services via the internet.

I Know First has a near-neutral algorithmic forecast for MSFT. My takeaway is that MSFT is still a buy due to its adoption of Google’s Chromium browser framework and PWA design. Nadella is a flexible manager and is willing to use rival companies’ ideas and technology designs.

Past I Know First Forecast Success With MSFT

On January 6, 2018 The I Know First predictive algorithm gave a bullish prediction for Microsoft with the signal being for the 1-year time horizon at 114.60 and with predictability indicator of 0.61. Over twelve months, the stock rose impressively by 15.58%.