Microsoft Corp. (NASDAQ: MSFT) is scheduled to report its fiscal fourth-quarter financial results after the markets close on Tuesday. This top old-school technology stock gives investors a degree of mega-cap tech safety and has a massive $105 billion sitting on the balance sheet. Recently the company also made a push to acquire LinkedIn Corp. (NYSE: LNKD), which is expected to be completed this calendar year.
The consensus estimates from Thomson Reuters call for $0.58 in earnings per share (EPS) on revenue of $22.14 billion. In the same period of last year, it posted EPS of $0.60 and $22.15 billion in revenue.
Numerous Wall Street analysts feel that Microsoft has become a clear number two in the public or hyper-scale cloud infrastructure market with Azure, which is the company’s cloud computing platform offering. Some have flagged Azure as a solid rival to Amazon’s AWS service. Analysts also maintain that Microsoft is discounting Azure for large enterprises, such that Azure may be cheaper than AWS for larger users.
The top analysts believe the company continues to make steady progress with its cloud transition and expect Office 365 and Azure to be solid contributors to the top and bottom lines for the next several years. While not likely to snag the top slot from Amazon, it could add huge incremental revenue for years to come, especially when you factor in the huge revenue potential from the banks, insurance companies and the financial services industry.
Finally, Microsoft’s recent announcement of a gigantic all-cash, $196 per share offer for LinkedIn rocked the markets. While some on Wall Street gasped at the huge premium paid, Microsoft continues to expand its product lines and cut its dependence on software sales. While it remains to be seen how the fit will be, the analysts like the overall product synergies the deal brings.
A few analysts weighed in on Microsoft ahead of the earnings report:
- William Blair initiated coverage with a Market Perform rating.
- Nomura reiterated a Buy rating with a $65 price target.
- JPMorgan reiterated a Hold rating with a $50 price target.
- Goldman Sachs reiterated a Neutral rating with a $55 price target.
- BMO Capital Markets reiterated a Buy rating with a $57 price target.
- Sanford Bernstein has a Buy rating with a $68 price target.
- Raymond James reiterated a Buy rating with a $65 price target.
- Citigroup has a Sell rating with a $37 price target.
- Jefferies reiterated an Underperform rating with a $40 price target.
Excluding Tuesday’s move, Microsoft has underperformed the broad markets, with the stock down over 1% year to date. However, over the past 52 weeks the stock is up nearly 20%.
Shares of Microsoft were trading at $53.74 on Tuesday, with a consensus analyst price target of $58.00 and a 52-week trading range of $39.72 to $56.85.
LinkedIn shares were at $189.37, with a consensus price target of $184.48 and a 52-week range of $98.25 to $258.39.
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