Oppenheimer analyst Timothy Horan upgraded Microsoft (MSFT) to Outperform from Perform with a $260 price target.

The stock closed Wednesday up 5% to $216.39.

A Biden Presidency should improve relations with China where Microsoft has significant exposure, while a Republican majority Senate should prevent higher corporate taxes, Horan tells investors in a research note. Further, the analyst expects Treasury yields to stay low, making Microsoft's 3% free cash flow yield "attractive."

Horan adds that Microsoft's cloud growth has been more resilient than expected as industries accelerate their digitization initiatives.