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'Another World Series cloud performance': 3 analysts react to Microsoft's 1st-quarter earnings report that sent stock to record highs

Markets Insider
Markets Insider
 2021-10-27

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Microsoft CEO Satya Nadella.
  • Microsoft stock spiked 4% on Wednesday to new record highs following its Q1 earnings report.
  • The cloud provider posted record revenues and profits that exceeded estimates.
  • Here's how three Wall Street analysts reacted to Microsoft's blowout quarter.

Microsoft stock hit record highs on Wednesday, jumping as much as 4% after the company reported strong first-quarter earnings.

The cloud provider posted record profits that exceeded analysts' estimates as growth in its Azure cloud and productivity units helped drive a 22% surge in revenues to $45.3 billion. The company also gave second-quarter revenue guidance that was ahead of consensus forecasts.

"We are off to a fast start for fiscal year 2021. The case for digital transformation has never been more urgent or more clear," said Microsoft CEO Satya Nadella.

Wall Street analysts seem to agree with him, as several raised their price targets for Microsoft stock and said the Redmond-based tech giant has more growth ahead. Here's how three analysts reacted to Microsoft's blowout quarter.

Wedbush: 'Another World Series cloud performance.'

Price Target: Maintained at $375

"Nadella & Co. handily beat Azure estimates by 300 bps with 50% cloud growth and gave December guidance well above expectations speaking to a cloud party that is still in the middle innings of playing out for Microsoft... We believe the strong numbers from Nadella & Co. is a broader indication of strength we expect to see across the enterprise cloud software landscape throughout this earnings season... In a nutshell, these results and stronger guidance will be enough to move the stock much higher into 2022," Wedbush analyst Dan Ives said.

Goldman Sachs: 'Azure continues to become an increasingly strategic cloud vendor.'

Price Target: Raised to $400 from $360

"The re-acceleration potential with Azure that we had anticipated is playing out and bodes positively for upcoming quarters...We continue to see Microsoft as well positioned to capitalize on durable secular growth in digital transformation budgets, and we remain convicted in our thesis that Microsoft Cloud is on track to generate $120-$140bn in annual revenue, likely 1-2 years ahead of our initial expectations at the time of our January initiation," Goldman Sachs said, led by analyst Kash Rangan.

Bank of America: "Cloud momentum continues with continues scale."

Price Target: Raised to $365 from $340

"Q1 results point to continued momentum in the two key cloud franchises... New industry cloud offerings are likely to add incremental growth from here. We are encouraged by continued ramp in cloud gross margin with estimated Azure margin in the 59%-60% range, trending toward industry competitive low 60s level... steady normalized low single digit growth for Server & Windows demonstrates Microsoft's ability to capture incremental growth in cloud, though not at the expense of these large, profitable legacy businesses," Bank of America said, led by analyst Brad Sills.

Read the original article on Business Insider

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