Why These 3 Microsoft Analysts Are Bullish Ahead Of Q4 Results

Microsoft Corp. MSFT is set to report fourth-quarter earnings following the market close on Tuesday, July 27. In anticipation of this earnings call, analysts at Citi, KeyBanc and Wedbush Securities have provided insight into the company’s market positioning.

The consensus estimates project fourth-quarter EPS of $1.90 and revenue of $44.1 billion.

Related Link: What To Watch For When Apple, Microsoft And Google Report Earnings Tuesday

Citi's Take On Microsoft 

“Recovering IT budgets, an uptick in expected reseller growth, signs of reacceleration in consumption models and slightly higher PC numbers vs. 3 months ago” have helped analyst Tyler Radke maintain a positive outlook for Microsoft’s fourth-quarter earnings. The analyst did not provide an exact EPS estimate.

Longer-term, Microsoft remains Citi’s top large-cap play among North American application software, systems software, and interactive home entertainment stocks, the analyst said in a note. 

The analyst maintained a Buy rating and raised the price target from $310 to $378.

KeyBanc's Take On Microsoft 

Microsoft is becoming increasingly strategically important in the realm of security, cloud migration and digital transformation, said KeyBanc's managing director and senior analyst of enterprise software Michael Turits.

According to a survey of IT value-added resellers (VAR), security, Office 365 and Azure are the top areas of spending as the world ushers in an enterprise shift to greater adoption of digital technologies, said the analyst.

The VAR survey additionally highlighted that Microsoft’s products rank highly against competitors, from dev-ops solutions such as GitHub to cloud solutions with Azure to security offerings, which surpassed Okta/Auth0, he said. 

The analyst reiterated an Overweight rating and increased the price target from $305 to $330.

Related Link: Microsoft Vs. Intel: Who's Winning?

Wedbush's Take On Microsoft 

Analyst Daniel Ives is expecting a “beat and raise” from Microsoft on earnings and guidance Tuesday. 

Azure deal sizes are “increasing markedly,” driven by an acceleration in enterprise-wide digital transformations to cloud architecture, said the analyst.

Azure is in its early stages of the roll-out, penetrating only 35% of Microsoft’s installed base, he said. Microsoft’s Office 365 transition should continue to provide tailwinds in enterprise Azure adoption, said Ives.

Digital transformation has an estimated $1 trillion total addressable market, and Microsoft is incredibly well-positioned to deploy Azure and Office 365 as the backbone of cloud enterprise solutions, said the Wedbush analyst.

Looking ahead, Wedbush maintains its Outperform rating on Microsoft with a $325 price target, mainly due to a growing cloud transformation story fueled by a currently large Microsoft software installed base. 

MSFT Price Action: Microsoft was trading down 0.43% to $288.43 at last check Monday.