'Boringly Excellent': Street Gushes Over Microsoft's Quarter, Feather In Cap For Nadella

Wall Street analysts gushed over yet another strong quarter from Microsoft Corporation MSFT as investors pumped the computing giant’s stock even higher.

Reactions on the Street ranged from astonishment over what one analyst called a “no blemishes” quarter to those no longer astonished because strength in Microsoft’s cloud business seems now to be the norm, with another analyst calling it "another boringly excellent quarter."

The reaction also included praise for CEO Satya Nadella and his move to guide the former software maker into the new world of cloud computing, which is what's driving the strength at the company.

The Analysts

• Wedbush analyst Daniel Ives reiterated an Outperform rating on Microsoft, raising the price target from $150 to $155.
• Canaccord Genuity’s Richard Davis reiterated a Buy rating with a $120 price target.
• UBS analyst Jennifer Swanson Lowe reiterated a Buy rating while raising the target price from $125 to $150.
• Bank of America Merrill Lynch analyst Kash Rangan raised the target price from $150 to $155 while reiterating a Buy rating.
• Morgan Stanley’s Keith Weiss kept an Overweight rating on the stock, with a price target hike from $140 to $145.
• Raymond James analyst Michael Turits reiterated a Strong Buy rating, raising the target price from $142 to $149.

The Theses

Microsoft’s results were “another feather in the cap for Nadella in the company’s quest to become a cloud behemoth as Azure grew 73 percent year over year and continues to gain share” over Amazon.com Inc. AMZN’s cloud business, Ives wrote in a very bullish note to investors. “This quarter was an absolute ‘blow out quarter’ across the board with no blemishes and in our opinion speaks to an inflection point in deal flow as more enterprises pick Redmond for the cloud.”

“Another boringly excellent quarter,” Davis wrote. “Both the shiny object of growth drivers and the ‘legacy’ component of the firm’s operations grew faster than even our upside hopes.”

Swanson Lowe expects Microsoft's Commercial Cloud business to grow to $104 billion by fiscal 2023 with Azure driving $50 billion of the increase.

“We see existing workloads moving into the Cloud and more likely to be created in the Cloud, as companies invest in Digital Transformation," she said.

Rangan said the latest earnings report validates projections of a “sustained beat and raise cycle” for Microsoft.

Strong growth in its public cloud business, machine learning and Internet of Things are driving double digit top-line growth, while management is getting better operational efficiency and margins out of the business.

Turits says Microsoft is a top-three cloud vendor, along with Amazon and Alphabet Inc. GOOGL’s Google, but has advantages over the other two competitors. Microsoft’s advantages include the ability to driver profits through other stackable products, from Office 365 to artificial intelligence.

Investors were also impressed, as Microsoft shares rose 3.4 percent to $129.33.

Related Links:

Microsoft Again Beats Street On Cloud Computing Strength

Azure Skies Ahead For Microsoft? Analysts Like Continued Cloud Computing Growth