A name to rely on in an uncertain environment, says Morgan Stanley


Even the most prominent names in the stock market are suffering from the inhospitable environment of 2022. Take Microsoft (MSFT) for example, whose shares have posted an unusual drop of 14% since the start of the year.

That said, to be able to withstand the fragile macro climate, Keith Weiss of Morgan Stanley 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 in the software space,” the 5-star analyst explained. “Leadership in key growth categories and CIO guidance for stable enterprise IT spending in CY22 should help offset the impacts of a volatile macro environment.”

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

Yes, there are headwinds. Weiss sees global macro uncertainties, a slightly larger currency impact than provided with guidance, and Windows OEM “growth normalization” as impacting performance, but also points out that “the combined impact should be limit”.

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

And while bears think Azure’s 40%+ growth is “unsustainable,” and fear that growth will “decelerate” rapidly year-over-year into the 30% range, heading for earnings in the 3QFY22, Weiss believes growth momentum remains “strong,” although he did not anticipate further acceleration.

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

In summary, Weiss continues to see an “attractive path forward, supported by CIOs’ view that Microsoft should gain the most IT portfolio share over the next 12 months, as well as, over the next three years as their businesses transitioned to the cloud.”

Overall, Weiss assesses that MSFT shares an overweight position (i.e. buy) and supports it with a price target of $372. If all goes according to plan, MSFT will climb 29% over the next 12 months. (To see Weiss’ track record, Click here)

Overall, Microsoft is that rare beast, with broad analyst coverage where everyone agrees; all 27 recent reviews are positive, naturally culminating in a consensus Strong Buy rating. At $374.88, the average price target sits just above Weiss’s and is expected to generate returns of 33% over the next few months. (See Microsoft stock predictions 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.


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