The Q2 earnings seasons will reach its apex this week, when the tech titans report the quarter’s financials. Following today’s closing bell, Microsoft (MSFT) will step up to the plate to deliver its fiscal 4th quarter (June quarter) earnings.
With the company being a “bellwether for global enterprise and cloud spending,” Wedbush’s Daniel Ives believes the Street will be tracking the quarter’s display and guidance with a “very close eye to gauge any demand downticks.”
Given the strength in the dollar, Microsoft has already warned the quarter will be marred by FX headwinds. Still, Ives thinks the company will be able to hit the “overall headline numbers” of $52.6 billion and EPS of $2.30.
In fact, the analyst thinks that based on industry checks, after clocking “cloud strength,” there could even potentially be “slight upside.” Accounting for the FX headwinds, Ives is looking for Azure growth of around 46% on a constant currency basis and approximately 43% year-over-year.
Microsoft’s business is expected to feel the impact of ongoing PC headwinds, but Ives believes the Street will mainly be focused on the picture regarding commercial cloud bookings and hoping Microsoft will guide for double digit operating income growth in 2023.
Evidently, based on the fact Microsoft – like other big players in the tech space – is slowing hiring, it is “keenly aware of a very rocky macro.” Ives gets fully behind it, with the “prudent proactive expense move” highlighting Microsoft’s readiness for the “impact to demand around the edges in 2023.”
That said, if there’s one company setup to withstand the current softer macro environment, it is the Redmond tech giant which stands to benefit from an going change in society.
“Our unwavering view is that despite the fear in the air given the Fed tightening backdrop and valuations falling off a cliff in tech, underlying digital transformation growth is accelerating and not decelerating into 2023 as part of this 4th Industrial Revolution,” the 5-star analyst summed up.
So, down to the nitty-gritty, what does it all mean for investors? Ives reiterated an Outperform (i.e., Buy) rating for the shares along with a $340 price target, which makes room for 12-month returns of ~35%. (To watch Ives’ track record, click here)
Looking at the ratings breakdown, one Street analyst remains a skeptic, but all 29 others are positive, naturally providing this name with a Strong Buy consensus view. Over the coming months, shares are anticipated to generate returns of 35%, considering the average price target clocks in at $339.72. (See Microsoft stock forecast on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
