Piper Sandler Sees Microsoft Poised To Cross $100B Annualized Run-Rate Benchmark

Piper Sandler analyst Brent Bracelin maintained Microsoft Corp MSFT with an Overweight and cut the price target from $352 to $312.
He saw Microsoft Cloud poised to cross over the $100 billion annualized run-rate milestone for the first time on 29% Y/Y estimated growth (~33% ex-FX).
Bracelin cut his estimates, factoring in further FX headwinds as U.S. Dollar strength continues to persist into July.
Relative to a 50% international mix, he right-sized his FY23 growth outlook to 13.2% Y/Y from 14.5%, factoring in FX headwinds and moderating enterprise IT spending over inflationary and recessionary fears.
The price target reflects lower estimates and a higher discount rate of 14% (vs. 12%).
The rating reflects a strong balance sheet with over $50 billion in net cash, strong operating cash flows above $90 billion annually, and 46% cloud revenue exposure that can help insulate growth even in a contracting business cycle.
He continued to favor MSFT over Oracle Corp ORCL (Underweight rated), which has fewer offset levers with just 26% cloud exposure.
Price Action: MSFT shares traded lower by 1.09% at $265.48 on the last check Friday.

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