Microsoft may be under pressure in the near term, but most analysts believe the stock remains a buy at current levels. The tech giant on Tuesday reported better-than-expected quarterly earnings, earning $2.32 per share. According to Refinitiv, analysts on average expected earnings per share of $2.29. Revenue came in at $52.75 billion, slightly below the estimate of $52.94 billion. However, Microsoft shares fell more than 2% in premarket trading on Wednesday after the software giant released a lackluster revenue forecast for the current quarter. CFO Amy Hood told analysts during a conference call Tuesday, “In our commercial business, we expect the business trends we saw in late December to continue into the third quarter.” The company’s Microsoft 365 subscriptions grew more slowly than expected . Growth was also slower than forecast for Microsoft’s identity and security services and business-focused Windows products. MSFT 1D-Berg MSFT under pressure Still, most analysts who follow Microsoft are firm on the stock. Citi analyst Tyler Radke said Microsoft remains “best positioned” among large-cap software names, saying it offers investors a good mix of growth and profitability. Radke has a buy rating on the stock and slightly increased his price target to $282 from $280. Specifically, the analyst said that “guidance appears more conservative to us, particularly at Azure, Windows OEM and Opex, likely in an attempt to mitigate FY23,” Radke wrote Wednesday. “While it’s difficult to call it the latest cut (pending macro factors/recession risk), MSFT’s consolidated sales and EPS growth are starting to accelerate from these levels, even at lower numbers, which we think can be a differentiator.” Morgan Stanley’s Keith Weiss kept an overweight rating on the stock and a price target of $307, saying the company’s near-term woes have created an “attractive entry point into one of the best long-term growth stories in tech.” In particular, the analyst expects the company’s AI developments to increase market opportunities for Azure. “Slacking comparatives, price hikes, easing foreign exchange headwinds and falling operating expenses are all working to accelerate EPS growth into double digits by the fourth quarter, which should bring investors back to MSFT,” Weiss added. Bank of America’s Brad Sills, meanwhile, reiterated his buy rating on the stock and said his long-term bullish view on Microsoft hasn’t changed. The analyst pointed to continued demand across Microsoft’s portfolio despite the current macroeconomic pressures. “With reported results of +/- 1% each versus forecast for the past 3 quarters and 3 quarterly forecasts in this environment, we believe Azure visibility can improve and the third quarter outlook can be exceeded by a similar magnitude” , Sills wrote. “The comment suggests that multi-year contracting has remained healthy and most of the headwinds in consumption are due to macro pressures rather than a surge in demand.” Sills expects Microsoft to continue delivering low double-digit growth for the next three to five years. Its price target of $300 represents an increase of more than 23% from the stock’s close on Tuesday. “Premium Rating” Gil Luria of DA Davidson was particularly bullish on Microsoft, saying the tech giant “deserves a premium rating compared to the market and its Pac4 peers.” The analyst believes the company’s forecast contains “properly calibrated” market expectations. “We believe FY23 estimates are now more risk-free as Azure and PC slowdowns reflect 2023 spending trends. By reporting earnings early, we believe MSFT is in better shape than other Pac4 (AAPL, AMZN, GOOGL) and software stocks, which have yet to reset expectations for slowing spending in 2023,” Luria wrote . Luria kept a buy rating and raised the company’s price target to $280 from $270. Of course, not everyone remained so bullish on the stock. BMO Capital Market’s Keith Bachman downgraded Microsoft’s shares to market performance, citing “continued uncertainty” with its Azure cloud business. He lowered his price target to $265 from $267. “We previously placed Microsoft on our negative watch list in our 2023 outlook note issued in December 2022, based primarily on concerns about Azure growth,” Bachman wrote. “Until Azure growth stabilizes, we expect the stock to remain range-bound.” – CNBC’s Michael Bloom contributed to this report.
https://www.cnbc.com/2023/01/25/latest-microsoft-results-show-the-tech-giant-is-still-a-buy-analysts-say.html The latest Microsoft results show the tech giant is still a buy, analysts say