Independent Research has raised its price target on Microsoft (MSFT) stock from $145 to $147. The firm has a “hold” rating on the stock. Wall Street analysts’ mean price target on Microsoft stock stands at $154, which implies an 11% gain from the current level.
MSFT stock performance
Amid recouping its macro cues, Microsoft stock has been surging. Since September 1, Microsoft stock has increased 1.1%, which is in line with its peers. Last week, MSFT was up about 1.5% due to its dividend hike and buyback announcement. To learn more, please read Microsoft Stock: Dividend Hike, Buybacks Attract Investors.
However, the market fell sharply late on Friday afternoon following the news of the Chinese delegation canceling a scheduled agricultural trip to Montana.
This development negatively impacted several tech stocks as well. Amazon (AMZN), Apple (AAPL), and Alphabet (GOOGL) (GOOG) fell 2.5%, 0.5%, and 0.8%, respectively, However, Facebook (FB) stock rose 1.5%.
MSFT surpasses analysts’ estimates
In its fourth quarter, Microsoft surpassed Wall Street analysts’ estimate on revenues and earnings. The company’s revenues of $33.7 billion exceeded Wall Street analysts’ estimate by about 3%. Its revenues also rose 12% year-over-year. Plus, Microsoft’s adjusted EPS of $1.37 beat analysts’ estimate by about 13%.
Expanding operating earnings
Microsoft’s operating earnings rose 20% YoY to $12.4 billion in the fourth quarter. This rise resulted from an across-the-board increase in its business segments.
On July 18, Microsoft CFO Amy Hood addressed the company’s operating earnings in its Q4 of fiscal 2019 earnings call, noting, “Operating margins again expanded this quarter, as a result of strong revenue growth, improving gross margins, and disciplined decisions we’ve made over the past 5 years to invest in strategic and high growth areas.”
The Productivity and Business Processes, Intelligent Cloud, and More Personal Computing segment’s operating incomes rose 25%, 15%, and 18%, respectively, in the quarter. Of these three segments, Intelligent Cloud contributed the most, 36%, to its total operating earnings. Azure’s growth drove the segment’s robust performance.
Azure is MSFT’s cloud computing platform, which provides features such as identity, security, infrastructure, and management. It also provides customers with unlimited data and analytics abilities across datasets.
Microsoft’s earnings forecast compared to peers
Wall Street analysts are quite positive on Microsoft (MSFT) stock. Currently, 32 of 34 Wall Street analysts rate Microsoft as a “buy” or “strong buy.”
In fiscal 2019, Microsoft stock’s adjusted EPS stood at $4.80. Analysts forecast Microsoft’s earnings to grow in the next two years. They estimate Microsoft’s EPS to rise 10% to $5.20 in fiscal 2020 and by another 13% to $5.90 in fiscal 2021.
Among Microsoft’s peers in the tech space, analysts expect Amazon’s (AMZN) earnings to increase 17% in 2019 and 41% in 2020. Also, analysts estimate Alphabet’s (GOOGL) (GOOG) earnings to increase 12% in 2019 and 14% in 2020. However, they expect Apple’s (AAPL) earnings to fall 2% in 2019 but rise 9% in 2020.
To learn more about the importance of Microsoft stock in the equity index, please read Dow Jones: AAPL, MSFT, and PG Drive Index to Record Highs in 2019.