247wallst.com/Chris Lange: As Microsoft Joins $1 Trillion Club, Analysts Look for Even More Upside

247wallst.com

As Microsoft Joins $1 Trillion Club, Analysts Look for Even More Upside

By Chris Lange    April 25, 2019 11:10 am EDT
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Microsoft Corp. (NASDAQ: MSFT) has joined a prestigious club, after reporting its most recent quarterly results late on Wednesday. Microsoft has become the third U.S. company to reach the fabled trillion-dollar market cap, after Apple and Amazon. Analysts couldn’t be more thrilled.

24/7 Wall St. has included some highlights from the earnings report, as well as what analysts are saying about Microsoft after the fact.

The software giant posted $1.14 in earnings per share (EPS) and $30.06 billion in revenue, which compared with consensus estimates of $1.00 in EPS and revenue of $29.84 billion. The same period of last year reportedly had EPS of $0.95 on $26.82 billion in revenue.

In terms of its segments, the company reported as follows:

    Productivity and Business Processes revenue was $10.2 billion and increased 14% year over year (up 15% in constant currency).
    Intelligent Cloud revenue was $9.7 billion and increased 22% (24% in constant currency).
    More Personal Computing revenue was $10.7 billion and increased by 8% (9% in constant currency).

As for the analysts, Merrill Lynch reiterated a Buy rating and raised its price objective to $155 from $150, implying an upside of 24% from the most recent closing price of $125.01. Its report said:

    We are raising our PO on Microsoft (+4% AH) from $150 to $155 following a strong March quarter, as we had previewed. All three segments (PB&B, IC and MPC) beat our estimates by 2-4%, with top-line growing +16% in constant currency. Our deep dive in Jan laid out our five growth drivers that we think can sustain 10-15% top line growth.

CFRA is not as optimistic as other analysts. The firm reiterated a Hold rating but raised its price target to $130 from $104 based on peer comparison valuations. CFRA also raised its EPS estimates for the 2019 fiscal year to $4.59 from $4.43, fiscal 2020 to $5.06 from $4.99 and fiscal 2021 to $5.83 from $5.78. The firm also noted that margins were restrained by a shift to cloud-oriented revenues and investments in cloud engineering and artificial intelligence but still called it another solid quarter despite thinking the shares are now fully valued at 27 times its fiscal 2019 estimate.

Here’s what a few other analysts had to say:

    Wedbush reiterated an Outperform rating and raised its target price to $155 from $150.
    KeyBanc Capital Markets reiterated its Overweight rating and raised its target to $143 from $141.
    Barclays reiterated an Overweight rating and raised its price target to $152 from $132.
    UBS reiterated a Buy rating on the shares and raised its price target to $150 from $125.
    Deutsche Bank reiterated a Buy rating and raised its price target to $145 from $130.
    Morgan Stanley reiterated an Overweight rating and raised its target to $145 from $140.

Shares of Microsoft were last seen up about 4% at $129.65, in a 52-week range of $92.45 to $131.37. The consensus price target ahead of these new analyst calls was $129.25.

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