Morgan Stanley says cyclical Azure impacts set up ‘attractive’ Microsoft entry

Coming out of a disappointing fiscal Q1 report, "there were two high-level questions investors wanted resolved before getting back on board" with Microsoft, contends Morgan Stanley analyst Keith Weiss. Namely, they wondered where, and when, does the deceleration in Azure growth stabilize and if the company still has the capability to protect EPS as growth slows after six straight years of operating margin expansion, the analyst tells investors in a research note. After the Q2 report, the first question remains unresolved, but on the second question, the company more clearly laid out the potential for further leverage, the firm said. Morgan Stanley, which sees "a clear path" for operating margins returning to expansion in Q4, says the near-term cyclical impacts on Azure "create an attractive entry point into one of the best secular growth stories in tech." Morgan Stanley keeps an Overweight rating and $307 price target on Microsoft shares.