Even the most famous names in stock markets are struggling in 2022’s hostile climate. Take note Microsoft (MSFT)For example, their shares have shown a 14% decline in year-to date.
Morgan Stanley’s Keith Weiss believes that Microsoft is better-positioned than most to withstand the current macro environment.
According to the 5-star analyst, Microsoft continues to be a rare combination in the software space of strong secular positioning and a reasonable profitability based valuation. Leadership in key growth categories, and CIO indications of stable Enterprise IT expenditure into CY22 should offset the volatility of the macro environment.
Weiss points out that, despite today’s uncertain environment, the overall software spending environment remains strong. Following the recent CIO survey by the banks, the analysts conclude that Microsoft still enjoys strong positioning across key growth categories and defensible spend categories.
Yes, there is a headwind. Weiss points out that global macro uncertainties and a slightly higher FX impact than the guidance and Windows OEM Growth Normalization are all factors that can impact performance. However, the combined impact should be minimal.
The company also has a significant tailwind. These headwinds should be countered by IT budget share gains as workloads migrate to the cloud.
The bears believe the 40%+ Azure growth rate is not sustainable and are worried that growth will slow to the 30% range. Weiss believes the growth momentum continues to be strong, even though he doesn’t anticipate any further acceleration.
Analysts expect a slight deceleration in cc revenue growth during the quarter. Weiss expects a 45% increase, but channel checks continue to indicate cloud strength. Weiss believes there may be some upside.
Weiss continues to see a promising path forward, supported in part by CIOs’ view that Microsoft should win the most IT wallet shares over the next twelve months as well as the next three years, as their companies transition into the Cloud.
Weiss rates MSFT shares as Overweight (i.e. Buy MSFT shares. Weiss backs it up by a $372 target price. If everything goes according to plan MSFT will increase 29% in the next 12 months. (To watch Weisss track record, Click here)
Microsoft is a rare and special beast. There is plenty of analyst coverage, where all are in agreement. All 27 recent reviews are positive, which naturally leads to a Strong Buy consensus rating. The average price target for Microsoft is $374.88. It is just above Weisss’ and is expected to generate 33% returns over the next months. (TipRanks provides a Microsoft stock forecast)
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Disclaimer: The views expressed in this article are solely those the featured analyst. This content is for informational purposes only. It is important to do your own analysis prior to making any investment.
These views and opinions are solely the author’s and do not necessarily reflect the views of Nasdaq, Inc.
