Microsoft’s Stock Is Well Worth Watching Ahead of Q2 Earnings

The Redmond, Washington-based global technology giant, Microsoft, is expected to post its fiscal second-quarter earnings of $2.28 per share, which represents year-over-year growth of over 12% from $2.03 per share seen in the same period a year ago.

The world’s largest software maker would post revenue growth of nearly 17% to around $50.3 billion. It is worth noting that with a track record of always beating earnings per share estimates in the last five years, Microsoft is one of the best FAANG stocks in terms of earnings surprises.

“We believe F2Q expectations are achievable driven by Microsoft’s (MSFT) WFA bundle although comps get progressively tougher in FY22; reflected in 14% yoy cons CY22 rev growth vs 20% in CY21. Investor focus will likely be on cumulative $88B in M&A & whether MSFT is buying rev growth or views these as opportunistic TAM expanders. Key items to watch are Azure (high 40s reported bogey) & comm booking. MSFT is down 10% ytd but trades at 31x CY22 EPS vs large-cap peer median 45x,” noted Brent Thill, equity analyst at Jefferies.

Microsoft stock traded 011% higher at $301.73 on Friday. The stock slumped nearly 11% so far this year after surging over 50% in 2021.

Analyst Comments

“While M&A news may garner near-term attention, another solid print highlighting the breadth of its strong secular positioning, durable margins, high teens total return profile and reasonable multiple likely reminds investors why Microsoft (MSFT) is the asset to own in unsettled markets,” noted Keith Weiss, equity analyst at Morgan Stanley.

“Strong positioning for public cloud adoption, large distribution channels and installed customer base, and improving margins support a path beyond $2T mkt cap. Durable double-digit NT rev growth is supported by Azure (winning in public cloud), data center (share gains and positive pricing trends), O365 (base growth and ARPU uplift) and LinkedIn. GM % improvement, continued opex discipline and strong capital return lead to durable teens total return profile. At ~26.6x CY23e GAAP EPS, MSFT trades at a discount to the large-cap peers, unwarranted due to MSFT’s premium return profile. Multiple expansion will likely come from more comfort in the durability of commercial business gross profit dollars.”

Microsoft Stock Price Forecast

Twenty-eight analysts who offered stock ratings for Microsoft in the last three months forecast the average price in 12 months of $372.92 with a high forecast of $425.00 and a low forecast of $320.00.

The average price target represents a 24.21% change from the last price of $300.24. From those 28 analysts, 22 rated “Buy”, four rated “Hold” while one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $364 with a high of $479 under a bull scenario and $253 under the worst-case scenario. The investment bank gave an “Overweight” rating on the global technology giant’s stock.

Several other analysts have also updated their stock outlook. Citigroup cut the price target to $376 from $407. CFRA raised the target price by $14 to $402. Mizuho cut the target price to $350 from $360. BMO lifted the target price to $360 from $355.

Technical analysis also suggests it is good to hold for now as 100-day Moving Average and 100-200-day MACD Oscillator flashing mixed signals.

Check out FX Empire’s earnings calendar