Wells Fargo: Business PC Market Stabilizing, Good For Microsoft

Microsoft Corporation MSFT should benefit from a stabilizing PC market and ongoing demand for business-use operating systems, Wells Fargo said Friday as it raised its target price on the software giant’s stock.

The Analyst

Wells Fargo’s Philip Winslow reiterated an Outperform rating on Microsoft and raised his price target from $130 to $135.

The Thesis

Winslow says market research data show commercial demand remains strong, even as overall PC shipment data continue to show declines year over year – though at a slower pace than a year ago.

Winslow also says Microsoft should continue to sustainably deliver EPS in the mid-to-high teens as its Azure cloud service and Office 365 suite continue to see robust growth.

“We reiterate our belief that the PC market is reaching a level of stabilization/growth after years of decline,” Winslow wrote in a note. “We believe the notable PC declines the industry has experienced should moderate throughout 2019, and as these headwinds decrease, we expect headwinds from Windows OEM revenue to Microsoft’s revenue and operating profit to similarly lessen—a key pillar of our positive thesis.”