Oppenheimer Raises Price Target on Microsoft (MSFT) to $65 Following 1Q Beat
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Oppenheimer reiterated an Outperform rating on Microsoft (NASDAQ: MSFT), and raised the price target to $65.00 (from $62.00), following the company's 1Q earnings report. Revenue of $22.3B beat estimates by 360bps. The revenue beat was driven by strength in all three business segments. Gross/operating margins came in 20bps/190bps above estimates which, along with lower than expected taxes, drove a $0.10 beat on Non-GAAP EPS of $0.66.
Analyst Timothy Horan commented, "MSFT's F1Q17 results were strong, with revenue of $22.3B beating our estimate by 360bps, with strength in every division driving a 100 bps margin beat. Azure grew 121%, a 10% beat, on strong demand/share gains, with a similar beat from Office 365/Dyanmics. That said, we are just beginning to climb the S-Curve adoption cycle and as cloud momentum continues, gross margins will continue to scale. Along with continued buybacks and CAPX efficiencies we believe FCF/share can grow in the 9% area over the next three years. Further, we believe the stock has a strong margin of safety given its 2.6% dividend yield, secular tailwinds, the company's strong balance sheet and strong barriers to entry. Raising PT to $65 from $62, reiterate Outperform; model attached."
Shares of Microsoft closed at $59.66 yesterday.
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