By Senad Karaahmetovic
The analysts of Morgan Stanley (NYSE:) reiterated an “Overweight” rating on Microsoft (NASDAQ:) stock and a price target of $307 per share.
Despite recent investor concerns that forecast numbers are still too high, analysts continue to see a strong (and lasting) demand signal in trading activity, which should help the tech titan improve its revenue growth. business and net income in the second half of next year.
“With strong competitive positioning and great secular growth opportunities, the company is looking to maintain current investments to capture market share, secure a larger share of IT budgets as businesses seek to consolidate vendors, and maintaining a long-term strategic positioning, rather than making more aggressive cuts to optimize near-term profitability. We broadly agree with this strategy,” they wrote to clients in a note.
Analysts also said the trading business is more sustainable than investors believe. They highlighted 4 reasons why they remain bullish on Microsoft stock.
Demand signals remain positive;
Operating expenses are expected to normalize in the second half of FY23;
Several revenue tailwinds towards 2HFY23; and
The valuation remains favourable.
On valuation, analysts note that Microsoft is trading at ~20x CY24 fiscal year GAAP earnings. This, along with accelerating EPS growth, should drive investors back to Microsoft shares, they conclude.