Microsoft Corporation (NASDAQ:MSFT) shares are down Wednesday, even more so than the market indexes, after the company missed revenue expectations in quarter results posted after the bell Tuesday.
That said, the stock is still a Buy, according to analysts at Wedbush. The firm reiterated that rating but lowered its price target to $280 from $290.
“The Street has been anxiously awaiting Microsoft results/guidance as Redmond is the best barometer of enterprise spending in the world,” the analysts wrote. “Ultimately, Azure growth of 38% came in ahead of Street estimates (37%) and were much better than whisper expectations with persistent black clouds over the Microsoft story the past few months.”
READ: Microsoft beats 2Q earnings expectations on strong Cloud growth but misses revenue estimates
“The bull/bear debate on MSFT will only intensify after this print,” they added. “The question now in the Street's mind is what does this Azure [deceleration] path look like over the coming quarters in a very uncertain macro.”
Despite a relatively fledgling demand for Azure, which CEO Satya Nadella acknowledged on an earnings call, Wedbush is optimistic about the coming quarters.
“We believe MSFT helped clear the decks on FY23/FY24 numbers that now lay the groundwork for hittable/beatable numbers over the coming quarters with Azure growth stabilizing in the ~30% range the next few quarters,” the analysts said.
“The bulls (our camp) will defend the stock citing cloud strength, margins holding up based on recent expense cuts, compelling risk/reward on the stock, and overall guidance that was better than feared. The bears will say the stock is expensive in a cloud decel environment, uncertainty in the macro, and an environment where MSFT is contending with the worst PC market in decades.”
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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