Stifel Raises Microsoft Price Target After 'Big Wow' Of A Quarter

Microsoft Corporation MSFT reported Thursday afternoon with a "big wow" of a fourth-quarter report that turned Stifel incrementally bullish.

The Analyst

Stifel's Brad Reback maintains a Buy rating on Microsoft with a price target lifted from $107 to $118.

The Thesis

Microsoft's fiscal Q4 print confirms that the tech giant's momentum across multiple product and services lines — hybrid, intelligent cloud/intelligent edge and gaming — remain strong, Reback said in a note. (See the analyst's track record here.) 

The analyst said the momentum should be sustainable in coming quarters for the following reasons: 

  • A favorable IT and macro environment.
  • The ongoing Win10 replacement cycle.
  • Strong execution from the sales force.
  • Ongoing expense discipline.

One "lone nit" was present in Microsoft's earnings report, Reback said: a miss on the cash flow line, as CFFO of $11.42 billion fell short of the $12.6 billion the analyst expected and the Street's model of $12.98 billion. Yet the cash flow miss was mostly due to multiple one-time items in the quarter, such as tax payments related to ASC 606 and TCJA, along with an earlier-than-expected start on building holiday-related inventory, he said. 

Microsoft remains attractive based on strong ongoing execution, attractive capital return of more than $20 billion annually and a "constructive" valuation at 18 times 2020 EV/FCF versus 14 to 19 times for mega-cap peers, according to Stifel. 

Price Action

Microsoft shares were trading higher by 2.95 percent off the open Friday. 

Related Links:

How Microsoft Could Build The 'Netflix Of Gaming'

Microsoft Shares On A Path Toward $130, Says Morgan Stanley

Market News and Data brought to you by Benzinga APIs
Comments
Loading...
Date
ticker
name
Actual EPS
EPS Surprise
Actual Rev
Rev Surprise
Posted In: Analyst ColorEarningsNewsPrice TargetReiterationAnalyst RatingsBrad RebackITStifelTechnology
Benzinga simplifies 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!