A Name to Count on in an Uncertain Environment, Says Morgan Stanley

Even the stock market’s most prominent names are suffering in 2022’s unhospitable environment. Take Microsoft (MSFT) for example, whose shares show a year-to-date uncharacteristic 14% decline.

That said, to be able to withstand the shaky macro climate, Morgan Stanley’s Keith Weiss thinks few are as well-positioned as Microsoft to do so.

“Microsoft continues to represent a rare combination of strong secular positioning and reasonable profitability-based valuation within the software space,” explained the 5-star analyst. “Leadership across key growth categories and CIO’s indications of stable Enterprise IT spending into CY22 should help offset impacts of a volatile macro environment.”

Weiss notes that even in today’s uncertain surroundings, the software spending environment as a whole “remains strong,” and following on from the banking firm’s recent CIO survey, the analyst’s takeaway is that Microsoft still boasts “strong positioning across key growth and defensible spending categories.”

Yes, there are headwinds. Weiss counts global macro uncertainties, a modestly higher FX impact than provided with the guidance and Windows OEM “growth normalization” as ones impacting performance, yet also stresses that the “combined impact should be limited.”

Not to mention, the company has one significant tailwind blowing at its back. As workloads continue the migration to the cloud, these headwinds should be “offset by IT budget share gains.”

And although the bears think the 40%+ Azure growth is “unsustainable,” and are concerned growth will swiftly “decelerate” year-over-year into the 30% range, heading into 3QFY22 earnings, Weiss thinks the growth momentum remains “strong,” despite not anticipating further acceleration.

For the quarter, the analyst expects a slight deceleration to cc revenue growth, calling for a 45% uptick, although the channel checks indicate “continued cloud strength,” and as such, Weiss thinks there could be “some upside.”

Summing up, Weiss continues to see an “attractive path going forward, supported by CIOs’ view that Microsoft should gain the most IT wallet shares in the next 12 months, as well as, over the next three years as their companies transition to the Cloud.”

All in all, Weiss rates MSFT shares an Overweight (i.e. Buy) and backs it up with a $372 price target. If everything goes as planned, MSFT will soar 29% over the next 12 months. (To watch Weiss’s track record, click here)

Overall, Microsoft is that rare beast, with plenty of analyst coverage where all are in agreement; all 27 recent reviews are positive, naturally culminating in a Strong Buy consensus rating. At $374.88, the average price target sits just above Weiss’s and is projected to generate returns of 33% over the coming months. (See Microsoft stock forecast on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

Source: https://finance.yahoo.com/news/microsoft-stock-name-count-uncertain-194155908.html