Microsoft On The Brink Of Inflection Point In Cloud Services

Microsoft Corporation MSFT shares closed up over 4 percent in a weak Friday session following an earnings report that Bank of America describes as strong “across the board.”

Analyst Kash Rangan is particularly impressed by Microsoft’s cloud numbers and management commentary. According to Rangan, the cloud business could soon start becoming even more profitable.

“Management comments also confirmed our view that cloud services is likely to see a significant inflection in profitability going forward as incremental capex growth levels off,” Rangan explained.

While cloud growth is accelerating, Bank of America also sees opportunity for Windows 10.

“We also believe a Win 10 enterprise cycle is likely, reinforced by 96 percent of enterprise customers testing Win 10, 3x growth in enterprise deployments of Win 10, and 3x jump in number of developers writing apps for the OS,” Rangan wrote.

Related Link: 5 Potential M&A Deals In The Media And Internet Space

Following the report, Bank of America reiterated its Buy rating for Microsoft, but raised its price target for the stock from $65 to $68.

Rangan noted that the higher price target reflects the company’s underappreciated cash flow, including an estimated $3 per share in fiscal 2017.

In addition to the price target change, Bank of America also changed its 2017 EPS and revenue estimates for Microsoft from $3.01 and $92.175 billion to $3.10 and$89.246 billion.

Full ratings data available on Benzinga Pro.

Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email feedback@benzinga.com with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!

Date
ticker
name
Actual EPS
EPS Surprise
Actual Rev
Rev Surprise
Posted In: Analyst ColorEarningsLong IdeasNewsPrice TargetAnalyst RatingsMoversTechTrading Ideascloudcloud computingcloud technology
We simplify the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!

Loading...