The Microsoft Analysts
Piper Sandler analyst Brent Bracelin maintained an Overweight rating and a $352 price target on Microsoft shares.Rosenblatt Securities analyst Blair Abernethy maintained a Buy rating and a price target of $349.
Wedbush analyst Daniel Ives has an Outperform rating and a $375 price target. The firm also kept the stock on its “Best Ideas List” and named Microsoft one of its favorite tech names for 2022.
RBC Capital Markets analyst Rishi Jaluria maintained an Outperform rating and a price target of $380.
The Microsoft Theses
Piper Sandler Recommends Buying Microsoft On Favorable Risk-Reward
Microsoft’s commercial bookings surged 32 percent higher year-over-year, accelerating from the 11 percent growth in the previous quarter, underlining enterprise appetite to invest in cloud computing, Piper Sandler’s Bracelin said in a note. Azure growth, excluding currency impact, moderated from 48 percent to 46 percent, he added.Azure revenue, however, crossed $40 billion on an annualized basis and remains poised to grow by 46 percent in the March quarter, the analyst said.
“The 1H operating margin of 44 percent reinforces our view that a cloud transformation has not only strengthened Microsoft’s growth prospects but also enhanced profitability,” he said in the note.
Bracelin expects Azure revenues to double within three years to over $86 billion.
Rosenblatt Dissects Segmental Performance
Microsoft reported solid second-quarter results, with better-than-expected revenues of $51.7 billion and third-quarter revenue guidance that is 2 percent above consensus, Rosenblatt’s Abernethy said.Among the company’s segments, Productivity and Business Processes revenues rose 19 percent to $15.9 billion, with Office Commercial product revenues climbing 14 percent, LinkedIn by 37 percent and Dynamics 365 by 44 percent, the analyst noted.
Wedbush Lauds Cloud Growth
Microsoft’s cloud guidance was stronger than the Street estimate, and factoring in forex headwinds, this is a blowout guidance, Wedbush analyst Ives said.On the bottom line, non-GAAP EPS of $2.48 was well above the Street estimate of $2.32, with a robust operating margin of about 43 percent, the analyst said.
RBC On Key Takeaways From The Call
Demand commentary for Cloud was largely positive, with broad-based demand across industries and large long-term Azure deals contributing to the strong commercial bookings acceleration, RBC’s Jaluria said.Microsoft showed off multiple growth drivers, including its Security, Advertising and Gaming businesses, the analyst noted. More Personal Computing surprisingly showed the most revenue upside to consensus, with Windows benefiting from strong commercial PC demand, he added.
The analyst noted that operating margin was up 150 basis points year-over-year and nicely above consensus.
Azure A Share Gainer, Wells Fargo Says
Microsoft is well-entrenched within several significant end markets, Wells Fargo’s Turrin said. Azure, according to the analyst, is a share gainer in the cloud Infrastructure as a Service (IaaS) wars.Microsoft shares are the cleanest way to “play the continued shift of IT purchasing $s towards software and cloud,” the analyst said.
