Credit Suisse: Microsoft's cloud will become the No. 2 leader behind Amazon
Bullish
Rating: Outperform
Price target: $55
"We believe that Outperform-rated Microsoft can return to double-digit EPS growth by (1) continued rationalization of its cost structure, (2) further divestitures/exits of non-core businesses, (3) optimization of its capital structure, (4) stabilization in Windows pricing, and (5) an accelerated shift to Office 365 (i.e., "pull a full Adobe").
"Furthermore, we believe that Microsoft Azure will emerge as the clear #2 market share player in public IaaS and will arise as the leader in public PaaS. We reiterate our Outperform rating and $55 target price."
Pacific Crest Securities: Microsoft is demonstrating financial discipline and growing its core businesses
Bullish
Rating: Overweight
Price target: $55
"Microsoft has started to deliver on the changes it announced last year. The company is demonstrating a renewed financial discipline, and we expect accelerating growth in the core businesses. Our price target of $55 is based on 13.3x estimated C2017 FCF plus $7.42 per share in net cash.
"At $55, MSFT would trade at a discount to the current market multiple and have a dividend yield of roughly 2.4%. We believe this multiple reflects the current headwinds to the PC business."
Deutsche Bank: The quarter 'wasn't pretty' but 'growth outlook is solid'
Bullish
Rating: Buy
Price target: $55
"While investors were already bracing for a mixed print [i.e. earnings report] given the weak PC market and disappointing results from ORCL, SAP and IBM, we conclude that MSFT’s 4QF15 results still fell short on the back of weak enterprise/server numbers, gross margin pressure from the out-performance in lower-margin Surface/Xbox, an EPS beat that came largely from non-recurring gains and light 1QF16 non-GAAP revs guidance (of $21.0b, $900m below our estimate).
"While the quarter wasn’t pretty, this growth outlook is solid in light of the PC market pressures (which should stabilize in the coming quarters), emerging markets weakness and the tough enterprise IT spending backdrop."
Oppenheimer: The foreign exchange rate is to blame for lowering guidance
Bullish
Rating: Outperform
Price target: $50
"Excluding the one-time impairment charge relating to the NOK write-off, MSFT results came in a tad better than consensus. Initial F1Q16 guidance is optically shy of prior estimates, but FX is the main culprit.
"The just reported F4Q15 showed: 1) Continued improvement for the Cloud Services products; 2) Continued cost containment further supporting margins improvement; 3) Positive road-map for WIN10 and 4) MSFT further re-positioning itself for post-PC era.
"We believe demand trends remain steady and strategically MSFT is making all the right moves."
Barclays: Microsoft's still has a promising 'cloud story'
Bullish
Rating: Overweight
Price target: $51
"Microsoft's results were mixed this quarter as solid commercial cloud growth and encouraging performance in computing and gaming hardware were not enough to fully offset the softness in PC sales, lower transactional revenue across the board, and weakness in most BRIC countries.
"Management's solid cost controls and improved gross margins were highlights, but the $0.06 outperformance in adjusted EPS was driven by other income and interest. Nonetheless, we believe Microsoft's cloud transition story remains unchanged, and we reaffirm our positive view on the stock."
S&P Capital: Microsoft's has strong potential with cloud computing
Neutral
Rating: Hold
Price target: $48
"We maintain our 12-month target of $48, on relative P/E and P/E-to-growth (PEG) analysis. The S&P 1500 IT sector's recent '15 P/E and PEG were 16X and 1.3.
"Applying those multiples, using premiums given our view of MSFT's strong cloud potential and balance sheet, and weighting P/E more heavily, leads to our target, implying a calendar year '15 P/E of 19X and PEG of 1.9."
MKM Partners: Microsoft's path to growing new businesses 'may take longer than many realize'
Neutral
Rating: Neutral
Price target: $48
"While forward EPS estimates have come down for MSFT over the past few quarters, the shares have held up relatively well as investors looked past near term profit sacrifices in favor of Cloud revenue accretion which the F4Q15 report now calls into question.
"It is clear though that the Cloud is accretive to Commercial bookings (even with PC weakness), although its path to incremental revenue and EPS may be longer than many realize. With the continuing profit overhang and a relatively rich 18x P/E on a stock whose main valuation metric is EPS, we retain our Neutral rating."
Jefferies: Sales to enterprises looks to be 'weaker than anticipated'
Bearish
Rating: Underperform
Price Target: $37
"Microsoft's F4Q headline numbers were slightly better than consensus, but top line mix was concerning and bottom line benefited by $0.05 from a $500M swing in other income.
"F1Q guidance was below estimates, as the corporate business looks to be weaker than anticipated. It also seems that any savings from recent $7.6B write-down of Nokia assets and $750-850M restructuring, including a 7% workforce lay-off will not benefit the bottom line, but instead be reinvested."
Citi: Lowering guidance, again, makes it 'hard to justify the stock'
Bearish
Rating: Sell
Price target: n/a
"Hard to justify the stock on numbers that come down again.
"Numbers shrink again – We expect street earnings power to be reduced further by ~$0.10 half on FX, half on lower commercial licensing. Beyond FY16, we expect debate to be LT OpEx run rate. Stock still has downside on lower EPS.
"We understand argument that company may be outgrowing its peers in enterprise, but this still comes with the cost of subsidizing consumer investments that are likely to drag on for some time."
