Pacific Crest: Microsoft Shares Worth $50 After Earnings

In a report published Friday, analysts at Pacific Crest Securities maintained their Overweight rating on

, while raising the price target from $48 to $50. The company reported its FQ3 results meaningfully above expectations. For FQ3, Microsoft reported its revenues marginally above the consensus, while the EPS and FCF were significantly higher than the Street consensus. Commercial licensing revenue, at $10 billion, was also higher than the consensus expectation of $9.8 billion. The commercial cloud businesses, consisting of Azure, Office 365 and Dynamics, posted constant currency growth of 111 percent. "The commercial cloud is now on a $6.3 billion annualized revenue run-rate, and we estimate that Azure is now on a $1.5 billion run-rate. Office 365 has over 62 million consumer and corporate users, which is less than 10 percent of the Office installed base," Pacific Crest added. At the same time, Microsoft has issues its Q4 sales and operating expenses guidance significantly lower than the consensus. The sales and EPS estimate for Q4 have accordingly been lowered. The analysts have, however, raised their estimates for 2016, driven by faster than anticipated due to faster than expected commercial cloud adoption and stabilization in the commercial licensing segment.