Ding dong, the market heavyweights are about to enter the earnings arena. Once today’s trading action comes to a halt, Microsoft (MSFT) will take its turn to deliver its September quarter results (first quarter of fiscal year 2023).
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As Wedbush analyst Daniel Ives notes, Wall Street will be keeping a close tab on the proceedings.
“Given the macro backdrop for global enterprise and cloud spending, the Street will be watching this report/guidance closely to determine if demand in Redmond has remained healthy for cloud spending given the gloomier background surrounding the Microsoft story,” Ives wrote.
With FX headwinds and the strong dollar continuing to weigh on the tech giant, the Street’s analysts see Microsoft’s total revenue hitting $49.70 billion. Considering some “cloud strength” Ives has been hearing of on the federal/enterprise front, this is a figure he believes is “hittable to even slightly beatable.”
While cognizant of soft spots in Europe and SMBs (small and medium-sized businesses), Ives believes Azure growth has “held up relatively well.” The same, however, cannot be said of the PC market, with “negative data points” from AMD and Intel indicating weakening demand which will almost definitely be reflected in the quarter. “That said,” Ives went on to add, “this dynamic is well understood by the Street with all laser focus on the company’s Azure and cloud growth which is the linchpin to the Microsoft long term bull thesis.”
As far as the bottom-line goes, like other tech stalwarts dealing with the soft macro environment, Microsoft is taking an aggressive stance on the cost cutting initiatives to “proactively preserve margins,” and as such, Ives believes the Street’s call for EPS of $2.31 should be “slightly conservative.”
All told, heading into 2023, Microsoft remains one of Ives’ “top picks in tech.” Accordingly, the analyst rates the shares an Outperform (i.e. Buy), while his $320 price target suggests shares will climb 28% higher over the one-year timeframe. (To watch Ives’ track record, click here)
Looking at the consensus breakdown, most other analysts agree with Ives’ assessment. With 28 Buys and 3 Holds, the word on the Street is that MSFT is a Strong Buy. At $315.36, the average price target implies shares could rise ~26% in the next year. (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.
