Microsoft: Oppenheimer's Look At A Very Strong Quarter

Oppenheimer in a note Friday offered its take on Microsoft Corporation MSFT's very strong fiscal year first quarter, which ringed in revenue and EBITDA, 4 percent and 8 percent, respectively, above its estimates.

As such, the firm reiterated its Outperform rating and $80 price target for the shares.

At time of writing, shares of Microsoft were up 6.95 percent at $84.23.

Analysts Timothy Horan, Matt Wilson and Tom Shaughnessy said revenue was strong across the board, with LinkedIn, 365, dynamics, Azure, personal compute all showing strength. Revenues beat their estimates by 390 basis points, the analysts added.

The analysts noted that Commercial bookings rose 14 percent, with Commercial Cloud rising 56 percent to $5 billion. Additionally, the analyst said gross margins expanded from 52 percent in the previous quarter to 57 percent.

Drawing conclusion from the results, Oppenheimer said macroeconomic environment has helped, with strong adoption of hybrid cloud and bottoming of PCs.

See also: Microsoft On Cloud 9 As Momentum Continues In Q1

Delving on the positives, the firm listed the following:

  • Across-the-board revenue and volume strength.
  • 42-percent growth in Office 365 Commercial, with 120 million subscribers.
  • 69-percent growth in Dynamics 365.
  • Better-than-expected net operating margins of 31.4 percent.
  • Higher ARPUs of Office 365, as customers move from E1 to higher-priced E3.

In the personal computing segment, the firm noted results came ahead of expectations, with surface revenues rising 12 percent and search revenues, excluding traffic acquisition costs, increasing 15 percent. However, the firm said gaming revenue growth of a mere 1 percent was underwhelming.

The firm noted that Azure cloud revenue and gross margins swelled, thanks to a higher mix of premium services and scale.

"With Azure Stack, we believe MSFT remains well positioned to become the dominant hybrid cloud provider, and we believe recent results continue to validate our thesis," the firm said.

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Posted In: Analyst ColorEarningsLong IdeasNewsGuidanceReiterationAnalyst RatingsMoversTrading IdeasMatt WilsonOppenheimerTimothy HoranTom Shaughnessy
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