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CitiGroup Tyler Radke repeated his Buy rating and lifted his target to a Street-high $411, from $378, which implied a potential gain of more than 40%.
“Into a high bar, Microsoft delivered a strong performance in Q4, with 4% revenue upside and even stronger profitability,” Radke wrote. He added that the fiscal first quarter outlook implies Azure is accelerating, which he sees as “the biggest positive takeaway” from the June quarter.
J.P. Morgan analyst Mark Murphy pkept his Overweight rating on the stock and boosted his target price to $310, from $300.
Morgan Stanley analyst Keith Weiss repeated his Overweight rating and lifted his target price to $305, from $300
Weiss thinks the stock has more room to run.
“Solid positioning for core secular growth trends, strong execution against those opportunities and a growing base of recurring revenues powered a significant Q4 beat,” he wrote, adding that the results “bolster our conviction in the durability of high-teens EPS growth at Microsoft.” He added that the stock offers “a rare secular growth story in software with room for multiple expansion.”
RBC Capital, analyst Rishi Jaluria assumed coverage of the stock, with an Outperform rating and a boost to the target price — to $360, from $290.
“We like Microsoft for its market leadership position in many critical areas of software, strong momentum with Azure and Teams, and multiple growth drivers,” Jaluria wrote.
Microsoft uploads some gains to broader market after announcing huge new buyback program
Microsoft (MSFT) massive new $60 bln share buyback program while also boosting its quarterly dividend higher by 11% to $0.62/share. Just behind leader Apple (AAPL), MSFT has the second highest weighting within the S&P 500 Composite Index. Therefore, the stock’s gains towards record highs are having a meaningful positive effect on the broader market today.
Like many other tech giants, MSFT is capitalizing on a powerful secular trend that kicked into high gear during the pandemic: namely, the digital transformation of businesses and the accompanying surge of data to the cloud. This is most vividly seen in the impressive growth of MSFT’s Azure cloud computing segment, which generated revenue growth of 51% in fiscal Q4 (ending June 30). During the Q4 earnings conference call, MSFT stated that it expects Azure Q1 revenue to remain stable on a sequential basis.
Furthermore, the work-from-home (WFH) transition has fueled a surge in demand for MSFT’s cloud-based offerings, such as Teams and Power Platform, with sales of its Windows Commercial products also benefitting from strong laptop and PC sales.
MSFT’s newly-enhanced capital allocation strategy provides a confidence booster that it anticipates these favorable trends to continue. The company already had a substantial share buyback program in place from its $40 bln repurchase authorization in 2019. Boosting that program by 50% is certainly an attention-grabbing maneuver.
Not only is the stock compelling from a growth perspective — especially ahead of its upcoming Windows 11 launch in early October — but its also attractive from a shareholder yield basis. On that note, today’s dividend increase represents the 12th straight year that MSFT has increased its quarterly dividend.
The main takeaway is that MSFT is providing the broader stock market with a needed spark, while simultaneously reinforcing its own bullish narrative by announcing a pair of very shareholder-friendly actions.
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