Shares of Microsoft Corporation (NASDAQ: MSFT)
were trading lower by around 0.50 percent Friday afternoon after the company reported its fiscal fourth-quarter results. Here is a roundup of what some
of Wall Street's top analysts are saying after the print.
Wells Fargo: Strong Execution
Microsoft proved it is seeing strong execution across every segment, Wells
Fargo's Philip Winslow commented in a research report. Of particular
note, the company's cloud segment, Azure, showed a 97 percent revenue growth, which marks an acceleration from 93 percent in each
of the prior two quarters. The segment also benefited from its 12th consecutive quarter of triple-digit revenue growth in Azure
premium services.
Also, a higher mix of cloud services resulted in a lower-than-expected gross margin and operating expenses came in
higher-than-expected as well. But the company still reported a total gross profit of $16.244 billion, which came in ahead of the
$16.048 billion analysts were expecting.
Bottom line, Microsoft's earnings report is supportive of the analyst's bull thesis that investors aren't fully appreciating the
company's opportunities in Azure and Office 365.
Shares remain Outperform rated with a price target boosted from $81.25 to $82.50.
Credit Suisse: Microsoft A Top Pick
Credit Suisse's Michael Nemeroff maintains an Outperform rating
on Microsoft's stock with an unchanged $84 price target. The company re-affirmed in its report the bullish case for owning
Microsoft's stock as it foreshadowed the true "earnings power potential" over the next few years.
Microsoft will be able to carry its momentum forward given the significant growth opportunity in the cloud along with higher
cloud gross margins over time.
Barclays: Strong Momentum
Barclays' Raimo Lenschow maintains
an Overweight rating on Microsoft's stock with a price target raised from $77 to $82 after the company beat every P&L
metric in its report.
Some of the highlights in the quarter include:
- Office 365 is now generated more revenue than on-premise.
- Azure's momentum and gross margins remain encouraging and the annualized cloud run rate of $18.9 billion represents around 20
percent of total revenue.
- Management offered once again a conservative guidance.
- Management's operating margin guidance instead of opex guidance implies it has "increased confidence" in revenue and margin
growth.
BMO: Free Cash Flow In Focus
Microsoft's free cash flow generation of $8.72 billion in the quarter was "very good" and represents a 50 percent year-over-year
growth, BMO Capital Markets' Keith Bachman noted. The analyst now
expects Microsoft's free cash flow to total $33.82 billion in fiscal 2018 and $35.76 billion the year after which will represent
around 32 percent of total revenue.
Meanwhile, Microsoft bought back $11.79 billion worth of its own stock in fiscal 2017 which represents 38 percent of total free
cash flow. The company is also expected to repurchase $10 billion of stock in each of the next two years.
Bachman maintains an Outperform rating on Microsoft's stock with a price target boosted from $75 to $86.
Bernstein: Investing For The Future
Microsoft's guidance implies a return to investment in management's strategy but this isn't any reason for concern, Bernstein's
Mark Moerdler noted. The company's investment spend is a direct
result of increased opportunity on the top line and as such should lead to higher than expected revenue in the future.
Moerdler maintains an Outperform rating on Microsoft's stock with a price target boosted from $81 to $87.
Elsewhere On The Street
- UBS's Fatima Boolani maintains a Buy rating on Microsoft's
stock with a price target boosted from $73 to $82.
- Citi's Walter Pritchard maintains a Neutral rating on
Microsoft's stock.
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Latest Ratings for MSFT
Date |
Firm |
Action |
From |
To |
Jul 2017 |
Citigroup |
Maintains |
|
Sell |
Jul 2017 |
Deutsche Bank |
Maintains |
|
Buy |
Jul 2017 |
Credit Suisse |
Maintains |
|
Outperform |
View More Analyst Ratings for
MSFT
View the Latest Analyst Ratings
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