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A handful of analysts raised their target prices following the earnings report.
Drew Angerer / Getty Images
While
Microsoft
posted better-than-expected results for the quarter ended in September, the software giant’s shares fell on Wednesday, in part because its outlook for the current quarter was not as strong as some investors and analysts had expected .
Microsoft (ticker: MSFT) provides revenue forecasts for each of its three business segments, and the outlook for its “More Personal Computing†segment, which includes Windows and Xbox, was a little below Wall’s expectations. Street, which led to overall revenue expectations just slightly below previous forecasts.
On the company’s post-earnings conference call with investors, CFO Amy Hood said the company expects $ 12.75 billion to $ 13 billion in revenue for the Productivity and Business Processes segment. ; $ 13.55 billion to $ 13.8 billion in smart cloud; and $ 13.2 to $ 13.6 billion for more personal computing. That’s a bit above Street’s previous estimates for productivity and business processes, but a bit below the consensus for more personal computing.
For the quarter ended September 30, Microsoft displayed income of $ 37.2 billion, up 12% from the previous year, and well ahead of the Wall Street consensus of $ 35.7 billion. Microsoft reported earnings for the quarter of $ 1.82 per share, beating the Street consensus of $ 1.54 per share by 28 cents.
A handful of analysts raised their target prices following the earnings report. Goldman Sachs went from $ 235 to $ 255, Morgan Stanley from $ 245 to $ 249, and Credit Suisse from $ 225 to $ 235. While the overall tone of analyst coverage was positive, the mixed earnings outlook weighed on equities.
“Microsoft delivered strong revenues and increasing EPS in the quarter despite the tough economic backdrop, with Azure constant currency growth of 47% beating expectations from the 40% average,†the analyst wrote. from UBS Karl Keirstead in a research note Wednesday. But he noted that the outlook was “more mixed,” with the implied overall revenue target of $ 40 billion, about $ 500 million below consensus, due to lighter-than-expected expectations for games, server and Windows products. But it kept its buy rating and its price target of $ 243.
Oppenheimer analyst Timothy Horan also noted a “strong beat” in the top and bottom results for the quarter, but expects “more volatility to come.” He wrote that “consumption remains a bright spot but is cyclical” and that “slowing cloud growth could increase competition and reduce business spending.” It maintained a Perform rating.
William Blair analyst Jason Ader, who earned an outperformance rating on Microsoft stocks, also noted that there was a lack of guidance on more personal computing, due to Xbox supply constraints and a “base expiration â€lower for Windows. “Given the stock’s high valuation and almost flawless execution over the past few years, some investors might dispute the drop in earnings,†he wrote. “We will respond by noting that the MPC segment is notoriously volatile and that most investors own shares in the Productivity and Business Processes (PBP) and Intelligent Cloud (IC) segments, which together are expected to grow 11% year over year. ‘other. year in the second quarter.
“Our view remains that, as Covid crystallizes the urgency of digital transformation, Microsoft remains in an enviable strategic position to help customers along their digital and cloud journey, with a proven ability to run on several vectors of growth. “
Around noon, Microsoft shares were down 3.7% to $ 205.41, a day the
Dow Jones Industrial Average
and the
S&P 500
were both down 2.7%.
Write to Eric J. Savitz at eric.savitz@barrons.com
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