Microsoft stock pullback is a ‘major buying opportunity’, analyst says

Text size

Tigress Financial’s Ivan Feinseth says Microsoft shares have a lot of upside potential.

Lisa Maree Williams/Getty Images

Investors are missing the point

Microsoft

as growth in the cloud continues to drive strong business performance, Tigress Financial analyst Ivan Feinseth said Friday, reiterating his buy rating on the stock.

Microsoft
it is

the stock (ticker: MSFT) is down more than 22% year-to-date at $260.84 and Feinseth views the price pullback as a major buying opportunity. It maintained its price target of $411 on Friday.

Feinseth bases his optimistic note on the belief that businesses large and small will continue to adopt Microsoft’s Cloud, Office and Teams products as digitalization accelerates. He also believes the tech giant will see growing success in gaming subscriptions and pointed to fiscal third quarter results as proof.

In its recent quarterly earnings report, Microsoft posted revenue of $49.4 billion, up 18% from a year ago, and above the Wall Street consensus of 47.5. billions of dollars, according to

set of facts

The data. The results were driven by the strength of its Intelligent Cloud segment, which saw a 26% year-over-year increase in revenue.

Specifically, Azure, its cloud computing service within the Intelligent Cloud, saw a 46% increase in revenue over last year and the number of customers over $100 million more than doubled. from one year to the next. Commercial bookings in the March quarter were better than expected and increased 28% from a year ago. MSFT continues to see strong cloud adoption and will benefit from the global economic recovery, which is driving continued increases in IT spending, Feinseth said in its note.

Add revenue from Xbox content and services to the mix and there’s a perfect storm. Microsoft’s More Personal Computing segment, which includes Windows, Surface and Xbox, generated $14.5 billion in revenue, above the company’s guidance range, Wall Street estimates and $32 billion. % more than the previous year, “overcoming fears of a slowdown”, Feinseth mentioned.

“MSFT continues to emerge as a dominant force in gaming and prepares to expand into the Metaverse with the recently announced acquisition of the industry-leading game developer

ActivisionBlizzard
,

” he noted. “We could see an expanded hosted multiplayer integrated platform lead to growing success of games and game subscriptions.”

Activision’s deal – the gaming industry’s biggest M&A deal – is likely to face regulatory hurdles. That said, it should be accretive to Microsoft earnings, according to Feinseth, and close by fiscal year 2023, which ends in June 2023.

Almost every analyst tracked by FactSet is on Feinseth’s side. Out of 44 analysts, 43 are bullish and one rates it as Hold.

Microsoft stock is up 2.3% at $261.12 on Friday. The average price target on FactSet is $360.71.

Write to Karishma Vanjani at [email protected]

Comments are closed.