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Why Micro Focus Stock Jumped on Tuesday

By Daniel Sparks – Jan 11, 2022 at 1:21PM

Key Points

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One analyst thinks Micro Focus is well-positioned for revenue growth in the coming years.

What happened

Shares of enterprise software company Micro Focus (MFGP) jumped on Tuesday, following an analyst's move to upgrade his rating on the stock. Shares of the stock increased as much as 12.6% but were up 11.7% as of this writing.

So what

Jefferies analyst Charles Brennan upgraded his rating on the stock from hold to buy, noting that organizations' digital transformations are not decelerating, leading to significant investment around the world in enterprise software. The analyst pointed out Gartner's recent bullish forecast for double-digit annualized growth in global software sales throughout 2025. 

A chart showing a stock price moving up and to the right.

Image source: Getty Images.

When the tech company reported its interim results for the six months ended April 30, revenue had slid 2% year over year, or 4.6% in constant currency. But management pointed to the company's long-term strategic partnership with Amazon's cloud computing business and arrangements with a handful of other major cloud players as evidence of the company's momentum.

"The product investments and operational changes we are making are beginning to deliver performance improvements, and our value propositions are resonating with customers and partners," said Micro Focus CEO Stephen Murdoch in the company's update last summer.

Now what

Micro Focus investors should mark their calendars for Feb. 8. This is when the company will announce its results for the 12-month period ending Oct. 31. Investors will likely be hoping that the company's transformation efforts are getting Micro Focus closer to revenue growth. In a Nov. 30 business update, management said that Micro Focus was at "an inflection point in its transformation journey." 

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Daniel Sparks has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool owns and recommends Amazon and Jefferies Financial Group Inc. The Motley Fool recommends Gartner and Micro Focus and recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.

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