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Microsoft Floats On Cloud Strength To Deliver A Strong Q4

Microsoft Floats On Cloud Strength To Deliver A Strong Q4
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After a strong earnings report, Barclays analyst Raimo Lenschow expects Microsoft Corporation (NASDAQ: MSFT) to continue to trade higher.

“The Office franchise is now generating more revenue with Office365 than on-premise. Azure is maintaining its strong momentum with a 98 percent y/y growth cc, ahead of last quarter’s growth of 94 percent, and cloud gross margins continue to improve. Bears will point to the below consensus guidance, but investors should be used to Microsoft's conservative guidance approach by now,” he wrote.

Lenschow reiterated his Overweight weight and raised his price target from $77 to $82 (see his track record here).

Strong Bookings Growth

“Microsoft delivered 43 percent growth with its Commercial Office365 offering, which benefited from higher volume and ASP’s.” This helped contribute to the 30 percent year-over-year growth in commercial bookings, and Lenschow expects this bookings trend to continue to change the shape of Microsoft.

Improving Cloud Margins

Lenschow highlighted how Microsoft’s cloud components are starting to show positive and improving gross margins. He also noted, “The fact that the company has moved from operating expense guidance to operating margin guidance shows that there is increased confidence in the revenue growth and margin evolution story.”

Overall, it is clear Lenschow sees Microsoft continuing to head in the right direction.

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Latest Ratings for MSFT

Jun 2018ArgusMaintainsBuyBuy
Apr 2018CitigroupMaintainsNeutralNeutral
Apr 2018BarclaysMaintainsOverweightOverweight

View More Analyst Ratings for MSFT
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