Microsoft Corp MSFT is set to report Tuesday after the bell as earnings season shifts into high gear and all eyes will be on the print.
What To Know: Wedbush was out with a new note on Microsoft ahead of the company's quarterly results. The firm maintained its Outperform rating on the stock.
"The whole Street [will be] watching carefully as this is one of the best barometers of overall cloud and enterprise spending," Wedbush analysts wrote in a new note to clients.
The analyst firm will be focused on Microsoft's cloud segment and the underlying Office 365/Windows ecosystem. Wedbush believes cloud is becoming a bigger part of the Microsoft story and will ultimately lead to better growth and improved margins.
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"We believe the shift to cloud is still less than 50% penetrated and represents a massive opportunity for Nadella & Co. going forward despite the dark storm clouds forming for FY23 in the uncertain macro backdrop," Wedbush said.
The economic outlook remained dim as the Federal Reserve repeatedly reaffirmed its 2% inflation goal and even discussed risks associated with a potential pivot. The headline CPI was up 6.5% in December, down from 7.1% in November and in line with average economist estimates. It's unclear how the Fed will respond but many expect the central bank to continue to raise rates.
After speaking with customers and partners of Microsoft, Wedbush was confident the company could ride out the current "economic storm" and ultimately come out stronger on the other side. The analysts even expect Microsoft to top Azure estimates after the bell.
Wedbush will also watch for updates on Microsoft-backed ChatGPT. The company made a third investment in Open AI just a day ahead of earnings.
"We believe this strategic investment is a smart poker move in this AI arms race that is taking place globally," Wedbush said.
Wedbush has a 12-month price target of $290 on Microsoft shares.
MSFT Price Action: Microsoft has a 52-week high of $315.95 and a 52-week low of $213.43.
The stock was down 0.16% at $242.18 at the time of writing, according to Benzinga Pro.
Photo: Courtesy of Microsoft
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