Microsoft Analyst Roundup

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Microsoft Corporation MSFT beat analyst estimates for its Q1 2015 earnings.

Microsoft reported EPS of $0.68 and $23.201 billion in revenue (adjusted for one-time Nokia items) versus consensus of $0.56 EPS and $22.015 billion in revenue.

The company’s stock spiked higher and traded at $45.85 Friday afternoon, up 1.84 percent. Year-to-Date Microsoft has gained 22.35 percent, compared to the Dow Jones up only 1.12 percent for the year.

Analysts seems to diverge in their outlook on the company with Deutsche Bank analysts the seeing challenges in the shift towards subscription-based models and shrinking margins in hardware sales from Surface and Nokia lines.

Below are highlights of what analysts thought after the earnings report, along with current ratings and price targets.

Credit Suisse - Outperform, $55 Price Target

"We believe that Microsoft can return to double-digit EPS growth and that multiple options exist for Satya Nadella and Amy Hood to unlock shareholder value, including (1) rationalizing the cost structure of the company...(2) potentially divesting/exiting underperforming/non-core businesses, (3) optimizing the capital structure...(4) increasing the level of buybacks/dividends, and/or (5) accelerating the shift to Office 365. If Microsoft were to enact the aforementioned financial/strategic changes, our price target could be biased at least into the $50s."

Deutsche Bank - Hold, $44 Price Target

"Microsoft’s results are now being impacted by tough PC compares, the mix shift to subscriptions and hardware-driven margin pressure. At 17-18x our revised CY2015 adjusted EPS estimate of $2.54, MSFT shares do not appear cheap. Upside risks include better than expected margins and an increase in the buy-back and downside risks include continued weak revenue guidance."

Morgan Stanley - Equal-weight, $51 Price Target

"Microsoft currently trades at 15x NTM EPS, in line with the S&P at 15.5x — and has an attractive dividend yield at ~3.3 percent. Further multiple expansion from here will be predicated on gaining comfort on the achievability and sustainability of mid to low teens EPS growth. Several factors we'd look to including 1) stronger growth and greater scale in Microsoft's Commercial Cloud business, which may warrant a higher multiple; 2) a more aggressive return of cash in the form of share repurchases or dividends; and/or 3) traction in some of the consumer and devices businesses, such as mobile."

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Posted In: Analyst ColorPrice TargetAnalyst RatingsCredit SuisseDeutsche BankMorgan Stanley
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