Microsoft Rallies as Results Beat ‘Virtually Every Metric’

(Bloomberg) -- Microsoft Corp. rose on Thursday as first-quarter results topped estimates and boosted analyst confidence, with Jefferies writing that the software giant should be able “to weather any storm.”

William Blair wrote that the company “continues to fire on virtually all cylinders,” and praised its “broad-based product strength.” Bloomberg Intelligence added that Microsoft is in “a stronger position” than its peers in the event that IT spending pulls back.

Multiple firms tweaked their price targets higher, although many of the quarter’s themes -- such as growing demand for Azure cloud-computing programs -- had been anticipated, meaning the quarter was viewed more as a confirmation of strength than a positive surprise.

Shares rose 2% in early trading, with the Dow component trading near an all-time high hit earlier this month. The stock has gained 16% off a June low.

Here’s what analysts are saying about the results:

Morgan Stanley, Keith Weiss

Growth in commercial bookings highlight “an impressive start” to the year. The results also featured a strong second-quarter earnings outlook, operating margins that “significantly outperformed,” and “solid” growth with Azure.

“Microsoft remains the best positioned name in tech for the emerging Hybrid Cloud architecture, with improving margins sustaining a durable mid-teens total return profile.”

Overweight rating, price target raised to $157 from $155.

Bernstein, Mark Moerdler

The company “beat virtually every metric driven by strength in Cloud, Sever & Tools, and Windows Pro.”

Outperform rating, price target raised to $167 from $162. The analysts “remain positive & like buying” the stock.

RBC Capital Markets, Alex Zukin

This was “a strong start” to the year, “with bookings strength across the board” and “no macro weakness.”

The revenue outlook “was lower than expected but with stronger margins, as gaming is expected to be weak.”

Outperform rating, price target raised to $163 from $160.

Jefferies, Brent Thill

Results were strong “across the board,” and it looks “positioned to weather any storm.”

Microsoft has “excellent visibility and line of sight into double-digit rev growth supported by multiple drivers and secular trends for the foreseeable future.”

Buy rating, $160 price target.

William Blair, Jason Ader

“Microsoft continues to fire on virtually all cylinders,” given “broad-based product strength.”

Even with difficult comparisons ahead, the company still expects “double-digit revenue growth for the fiscal year, double-digit operating income growth,” and also an expansion in adjusted operating margins.

The product portfolio “remains well positioned to capitalize on customers’ digital transformation priorities,” and it should “stay out of the antitrust spotlight.”

Outperform rating.

BMO Capital Markets, Keith Bachman

The results support the view that Microsoft is “a core holding that has both defensive and offensive attributes.”

The results “did not highlight a slowdown in tech spending, which should come as some relief across software in the near term.”

Outperform rating, $165 price target.

What Bloomberg Intelligence Says:

“Microsoft is in a stronger position than cloud peers in the event of a pullback in IT spending.”

“No signs of a slowdown across its cloud or legacy offerings highlight Microsoft’s well-rounded portfolio and resilience in the face of a downturn.”

- Analyst Anurag Rana

- Click here for the research

To contact the reporter on this story: Ryan Vlastelica in New York at rvlastelica1@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Steven Fromm, Will Daley

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