Crisis is an Opportunity for Microsoft

Microsoft (SYM: MSFT) had dismal results this week.

All after the tech giant underwhelmed with revenue guidance of between $67.7 billion and $68.7 billion, which is below estimates of $69.8 billion.

But don’t write the stock off.  Instead, use the weakness as an opportunity.

Analysts are still bullish on the stock. Citi, for example, just raised its price target to $497.

“We expect stock to trade down on the Azure hiccup but with likely positive EPS revisions given stronger efficiency and with a valuation multiple that is within historical ranges and at similar levels to other large-caps, with better growth/AI revenue at scale at MSFT we remain buyer,” said the firm, as quoted by CNBC.

Goldman Sachs says it’s a buy with a $500 price target. JPMorgan raised its target to $465/ Mizuho Securities raised its rating to outperform with a $500 price target, noting:

“Despite the disappointment, we remain confident that MSFT’s revenue growth opportunities over the medium-term and beyond are greater than many realize, and we continue to be very bullish on its tangible GenAI adoption and monetization levers,” Mizuho added.

Plus, analysts at Deutsche Bank now has a buy rating with a $475 price target.

In short, once the temporary crisis is over, investors may want to take full advantage of the weakness – especially on the heels of the artificial intelligence boom.

Second Quarter Results Were Strong

In its latest report, Microsoft EPS of $3.23 beat estimates of $3.11. Revenue of $69.63 billion beat estimates of $68.78 billion. Operating income jumped 17% year over year to $31.7 billion. Net income was up 10% to $24.1 billion.

“We are innovating across our tech stack and helping customers unlock the full ROI of AI to capture the massive opportunity ahead,” said Satya Nadella, chairman and CEO. “Already, our AI business has surpassed an annual revenue run rate of $13 billion, up 175% year-over-year.”

“This quarter Microsoft Cloud revenue was $40.9 billion, up 21% year-over-year,” added Amy Hood, executive vice president and chief financial officer of Microsoft. “We remain committed to balancing operational discipline with continued investments in our cloud and AI infrastructure.”

Additional Reading: We recommended Palantir in 2021, now we’re recommending this… 
This one investment could soon impact $85 trillion in economic activity.
That’s 13-times bigger than oil…
6-times bigger than the digital economy…
7-times bigger than healthcare.
And ONE firm – currently trading for only $20 a share – holds all the cards in this sector.

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