Credit Suisse Maintains Outperform on Microsoft, Raises PT to $42.50 from $40.00

In a report published Friday, Credit Suisse analyst Philip Winslow maintained Outperform on Microsoft Corporation MSFT, raising its price target to $42.50 from $40.00 According to the report, the combination of more attractive price points, the ramp of new chipsets from Intel, greater touch screen adoption and the release of Windows 8.1 will drive a rebound in PC shipments should lead to an improvement in Windows revenue growth and profitability in H2 FY2014. “Despite the continued weakness in server and PC shipments during the December quarter, Microsoft reported FQ2 results above consensus estimates—with strength across all operating segments, particularly D&C Hardware (with Surface revenue increasing from $400 million to $893 million quarter to quarter) and Commercial Licensing (driven by better than expected transactional Office revenue),” the report noted. “Additionally, Microsoft's Cloud Services business (consisting of Office 365 and Azure) grew 103% year over year, and although the transition to Office 365 and Azure is cannibalizing near-term revenue, we firmly believe that the lifetime revenue and operating profit of both Office 365 and Azure are meaningfully higher than the traditional license model.” MSFT closed Thursday at $37.33 with shares trading up at 3.73 percent.