FBR Maintains Outperform On Microsoft, Sees 'Golden Age' Of Cloud Coming

In a report published Friday, FBR Capital Markets analyst Daniel H. Ives maintained an Outperform rating on Microsoft Corporation MSFT, with a price target of $53, ahead of the company's F4Q15 results scheduled for July 21. Analyst Daniel Ives expects Microsoft to report its quarterly total revenue and pro forma EPS at $22.0 billion and $0.56, respectively. The GAAP EPS estimate has been reduced from $0.56 to a loss of $0.45, to reflect the $7.6 billion Nokia write-down and some expected restructuring charges. The FY16 revenue and pro forma EPS estimates have been reduced from $96.6 billion to $88.5 billion and from $2.88 to $2.12, respectively, to reflect the Windows 10 revenue recognition policy. Ives believes that F4Q15 was "another important step in the right direction" for Microsoft, as the company witnessed "continued traction" for its core cloud products, like Office 365 and Azure." In the report FBR Capital Markets noted, "Overall, with Nadella making the tough but smart move, in our opinion, to "rip off the Band-Aid" in terms of the Nokia acquisition/write-down, we believe Microsoft's laser-focus on software versus hardware with a massive product cycle in its back pocket leaves it well positioned to enter the "golden age" of cloud computing with Windows 10 front and center as a major potential catalyst." "While Microsoft's commercial cloud has an annual run-rate trajectory of roughly $6 billion, we believe its best cloud days are ahead given positive checks from the field around solid uptake of key cloud products, which we believe were stronger than Street expectations in F4Q, and as Microsoft looks to strike the right balance of growth and profitability around its cloud endeavors with solid momentum heading into FY16," Ives added.