Amid growing signs of an acceleration of corporate IT spending, Wall Street analysts have been ratcheting up expectations for Microsoft, which is due to report fiscal fourth-quarter results on Tuesday.
The bullish sentiment has driven Microsoft shares (ticker: MSFT) to new heights. The stock on Friday rallied 1.2%, closing at a record $289.58. The stock is up nearly 31% year to date, driving the company’s market cap to $2.18 trillion, trailing only Apple (AAPL) at $2.48 trillion.
Street consensus calls for Microsoft revenue of $44.1 billion and profits of $1.90 a share. Microsoft provides guidance for each of its three reporting segments; at the top of the projected range for each, revenues would be $44.5 billion.
Microsoft forecast June-quarter revenue from its Productivity and Business Processes segment (which includes Office) of $13.8 billion to $14.05 billion; for Intelligent Cloud (including Azure), $16.2 billion to $16.45 billion; and for More Personal Computing (including Windows and Xbox), $13.6 billion to $14 billion.
For the September quarter, the Street consensus calls for revenue of $42.5 billion and profits of $1.95 a share.
Wall Street’s software analysts have been busily surveying Microsoft’s partners and resellers for clues to the quarter, and they’re all finding reasons for optimism.
Citigroup analyst Tyler Radke on Thursday repeated his Buy rating on Microsoft shares, jumping his target price to a Street-high $378 from $310, after a survey of IT resellers. His new target implies a 35% upside from Wednesday’s closing level. Radke expects a strong finish to the company’s fiscal year, driven by recovering IT budgets, reacceleration in Azure, and continued strength in personal computer sales. He writes that Microsoft remains his favorite pick in the megacap software sector, with “multiple levers” for double-digit growth.
BofA Securities analyst Brad Sills likewise last week reiterated a Buy rating after a series of “channel checks,” while upping his target to $325 from $305. He thinks revenue could beat consensus by 2% to 3%, driven by strength in Azure and Office 365 demand. Sills believes Azure can continue to grow at better than 50%, following 59% growth in the March quarter. (He notes that the company gets a relatively easy comparison on Azure, with 47% growth in the year-earlier quarter.)
KeyBanc analyst Michael Turits maintains his Overweight rating on Microsoft, while lifting his target on the stock last week to $330 from $305. His call was part of a broadly optimistic take on June quarter IT spending based on a reseller survey. He says respondents now see 5.6% growth in 2021 IT budgets, up from 4.6% in the first-quarter version of the same survey. Turits writes that the survey found Microsoft’s strategic importance is increasing. He also raised targets on Arista Networks (ANET), Commvault (CVLT), Fortinet (FTNT), Okta (OKTA), Oracle (ORCL), Palo Alto Networks (PANW), and Vonage Holdings (VG).
Rosenblatt Securities analyst John McPeake last week boosted his target price on the stock to $333, from $301, while repeating his Buy rating. McPeake contends that Microsoft’s fundamentals are as strong as any time in recent history. “Azure continues to take share, demand for PCs remain robust, and Office, Teams and Dynamics [are] likely to continue to grow in the double digits.”
Write to Eric J. Savitz at [email protected]
