Why BofA Is Still Bullish On Microsoft Ahead Of Q2 Earnings

Microsoft Corporation MSFT is scheduled to report its fiscal fourth-quarter results on July 26.

The company is likely to report revenues of $52.3 billion, representing 13% year-on-year and 16% sequential growth, with Azure and O365 upside offset by PC and Windows weakness, according to BofA Securities.

The Microsoft Analyst: Brad Sills maintained a Buy rating for Microsoft, with the price target unchanged at $345.

The Microsoft Thesis: Partner commentary suggests that workload migration to the Azure cloud platform from Power Apps, Dynamics, Server Annuity/hybrid and Office 365 has remained strong, Sills said in the note.

“We noted incremental strength from security/active directory,” the analyst wrote. “We look for cc Azure growth of 48%, versus our base estimate for 46%,” he added.

In PBP, there could be an upside of $100 million to the $16.6 billion estimate, Sills mentioned. “We are comfortable with our O365 subscriber growth estimate of 14%, decelerating 2% points from 16% in Q3 on a 2% point tougher compare,” he added.

“In MPC, we expect $300mn to $400mn downside to our $14.7bn (+4 y/y, +7% cc) estimate, given lower PC shipments in calendar Q2,” the analyst further wrote.

MSFT Price Action: Shares of Microsoft had risen by 0.81% to $258.80 at the time of publication Monday morning.