Microsoft Earned Price Target Bumps From Analysts Due To Azure Growth Despite Missing Q4 Due To Macro Headwinds

Analysts expressed optimism over Microsoft Corp MSFT Azure following its Q4 miss. BofA analyst Brad Sills reiterated his Buy rating and a price target of $345 following its solid Q4 results and saw its outlook underscoring its resilient growth.

Sills saw the $100 million+ Azure deals offset some consumption headwinds. He cut the FY23 outlook to reflect currency headwinds.

Microsoft continued to be his top pick, well positioned to withstand macro challenges in key growth franchises.

BMO Capital analyst Keith Bachman maintained an Outperform and raised the PT from $305 to $320, positioning it in his Tier 2 of Outperform-rated stocks. 

The bookings commentary impressed him amid the macro concerns. Bachman believes low Azure expectations versus previous quarters are a given due to the macro odds.

He saw the quarter as a source of modest relief, with Azure results/guide, management affirming double-digit CC, reported FY23 growth potential, and strong bookings, all positive or better than feared. However, he considered Windows results as a disappointment. 

RBC analyst Rishi Jaluria had an Outperform rating with a PT of $380. His takeaways included management expectations of double-digit revenue and operating income growth in FY23; Azure revenue growth guide of 43% Y/Y cc; and management's overall optimism amid macro concerns pressurizing consumer/SMB businesses.

Wells Fargo analyst Michael Turrin had an Overweight rating and $350 PT.

While Q4 results came in modestly below consensus, commentary around share gains across multiple product areas, sustained double-digit revenue growth (both as-reported and CC), and flat operating margin expected into FY23 represented a relief relative to where macro headwinds led expectations into earnings. 

Turrin continued to view MSFT as well-entrenched within several significant markets, Azure as a share gainer in cloud IaaS, and MSFT shares as the cleanest way to play the continued shift of IT purchasing $s towards software and cloud, especially in the current environment. 

Morgan Stanley analyst Keith Weiss had an Overweight rating and PT of $354. While macro impacts were undoubtedly evident in Q4, the 35% YoY cc growth in Commercial bookings highlighted Microsoft's strong value proposition and solid secular positioning, while sustained guidance for double-digit operating income growth illustrated a steady hand at the helm.

Rosenblatt analyst Blair Abernethy had a Buy rating and PT of $330. Microsoft's Q4 missed Abernethy's expectations as it experienced headwinds from forex, weaker PC sales, and lower advertising spending. 

Azure and other cloud services drove Microsoft Cloud revenue growth of 33% Y/Y. Abernethy justified Microsoft's dismal guidance citing continued headwinds. Post Q4, he cut his FY23-24 outlook marginally.

Wedbush analyst Daniel Ives maintained an Outperform and cut the PT from $340 to $320. Total revenues came in slightly below the Street while EPS also came below the Street's estimate. 

Headline numbers missed Street expectations primarily on FX issues and China shutdowns (PC weakness). While the headline numbers were below the Street, the underlying core metrics around cloud and commercial bookings were vital and will focus on the Street digesting results this morning. 

Piper Sandler analyst Brent Bracelin had an Overweight rating and PT of $312. Despite a challenging macro backdrop coupled with meaningful FX headwinds, MSFT closed out its FY22 with strong commercial bookings growth and continued Azure growth on a record number of $100 million+ and $1 billion+ deals, he noted. 

Microsoft Cloud crossed the $100 billion revenue run-rate mark, underscoring cloud demand fundamentals' resiliency. While FX, the softening PC market, reduction in advertising spend, and general spend optimization will continue to impact MSFT near term, he views this cloud king as a good way for investors to play it safe, he added. 

Price Action: MSFT shares traded higher by 4.93% at $264.31 on the last check Wednesday.

Photo by Rainer Stropek via Flickr