4 Ways Microsoft Can Hit Double-Digit EPS Growth Again: Analyst

In a report published Friday, Credit Suisse analysts maintained an Outperform rating on Microsoft Corp MSFT, with a target price of $55. Microsoft reported its FQ3 revenues, margins and EPS above consensus expectations. The robust performance came despite the expected continuation of negative Windows and Office metrics and reflects the company's continued cost control discipline. The company's Office 365 and Azure continued to show strong performance—with Office 365 reaching 12.4 million consumer subscribers (up 35% sequentially) and Commercial Cloud revenue growing 106% year over year. "Although management guided FQ4 revenues below consensus and the acquisition of Nokia is proving harder than expected to stabilize, we believe the stage is set for improved PC shipments and Windows revenue growth in H1FY2016 due to: (1) the release of Windows 10 in late summer driving an "inventory restocking," (2) stabilization in commercial demand following difficult comparisons, (3) a slowdown in the tablet market, and (4) increased popularity of hybrid laptops," the analysts stated. The FY2015 revenues estimates have been reduced from $94.412 billion to $93.560 billion. "Microsoft is poised to return to double-digit EPS growth by continued rationalization of its cost structure, potential divestment of its non-core businesses, optimizing the capital structure, stabilizing its Windows pricing strategy and accelerating the shift to Office 365," the report mentioned. "We believe that Microsoft Azure will emerge as the clear #2 market share player in public IaaS and will arise as the leader in public PaaS," the analysts added.