Microsoft Analyst
Brent Bracelin maintained an Overweight rating and $352 price target on Microsoft shares.Microsoft Thesis
Durability of the Microsoft model will be on full display next week, helped by the increase in the cloud mix shift to 48 percent of the total revenues from 41 percent in 2021, analyst Bracelin said.The analyst sees a positive bias for Office365, where new productivity, collaboration, and security features continue to be layered in; this is particularly important as labor remains one of the highest costs for most large enterprises, he added.
With the management guiding for a sequential improvement in Azure, there is little margin for error for the business, Bracelin said. The analyst expects commercial bookings to continue to see a moderation in growth.
While noting that International Business Machines Corporation raised its forex headwind expectations for 2022 from 2 percent to 3 percent–4 percent, the analyst said he sees forex risk to Microsoft’s guidance too. Both companies have similar international exposure, he added.
Every 1 percent of forex headwind could drag quarterly revenue by over $400 million, the analyst estimates. There is little margin for error, given the consensus long bias on Microsoft, coupled with increasing global risks, he said.
“We maintain at Overweight, but acknowledge a mixed earnings report and FX adjusted outlook might not be enough to spark a material rally,” Bracelin said.
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