Folks, it’s time to close the stock market; shares of Microsoft (MSFT) are – whisper it – down 15% this month.
With the tech giant due to report Q2FY22 results (December quarter) on Tuesday (January 25, AMC), can normal order be restored with the help of a decent display?
Whether it helps to propel shares forward, according to Rosenblatt analyst Blair Abernethy “another strong performance” is on the way. “We believe IT spending, and the Digital Transformation and shift to the cloud trends remained strong in the December quarter,” the analyst said.
Abernathy anticipates FQ2 revenue will hit $50.72 billion, which is higher than the FactSet consensus estimate of $50.64 billion and also veers toward the high end of the company’s guidance of $50.15-$51.05 billion. The analyst expects operating margins of 41.4%, around the same as consensus at 41.1% and guidance of ~41.0%. On the bottom-line, Abernethy calls for Non-GAAP EPS of $2.31, the same as the Street’s forecast and right at the top end of the “implied guidance,” which had $2.25-$2.31.
Looing head to FY22, Abenerthy “continues to expect” revenue growth of 17.8% which is also above the Factset consensus growth estimate of 16.7%.
Microsoft has been busy on the M&A front and following completion of the final regulatory hurdles and UK review – due in the spring – the analyst anticipates the ~$20 billion Nuance deal to close. The acquisition should “double Microsoft’s TAM in the healthcare vertical” to $500 billion, although Abernethy has not factored in any anticipated revenue from the new addition into his model yet. The analyst also does not anticipate finding out any more details regarding the the proposed $68.7 billion Activision Blizzard deal at the moment.
All in all, there’s no change to Abernethy’s Buy rating or $349 average target. The implication for investors here? Upside of 21% from current levels. (To watch Abernethy’s track record, click here)
Over the past 3 months, 28 analysts have reviewed MSFT’s prospects, of which one remains on the fence, but all other are positive, providing the stock with a Strong Buy consensus rating. Going by the $372.92 average price target, shares are expected to be changing hands for a 26% premium a year from now. (See Microsoft stock forecast on TipRanks)
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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.
