Tech bellwether Microsoft will report its fiscal third-quarter results after the market close on Wednesday. Following the recent decline in MSFT stock, one analyst thinks the software giant has a "derisked setup" for its earnings report.
Jefferies analyst Brent Thill reiterated his buy rating on Microsoft stock with a price target of 475. On the stock market today, Microsoft stock dipped 0.2% to close at 391.16.
In a client note Monday, Thill said better-than-feared results from software peers Alphabet, SAP and ServiceNow indicate a resilient macroeconomic climate.
"Setup is derisked for MSFT with (its) multiple compressing 13% since (its) fiscal Q2 print," Thill said.
Thill said he is bullish on Microsoft's long-term outlook and its ability to gain market share in cloud computing, especially its Azure infrastructure business. The company's artificial intelligence initiatives, branded Copilots, also are a growth catalyst, he said.
However, he expects Microsoft to give conservative guidance, given the uncertainty around the Trump tariffs.
Analysts polled by FactSet predict Microsoft will earn $3.22 a share, up 10% year over year, in the March quarter. Revenue is seen rising 11% to $68.43 billion.
For the June quarter, Wall Street is modeling Microsoft earnings of $3.32 a share, up 13%, on sales of $72.24 billion, up 12%.
MSFT Stock Sustains Buy Ratings
Elsewhere on Wall Street on Monday, Deutsche Bank analyst Brad Zelnick maintained his buy rating on MSFT stock with a price target of 475.
In a client note, Zelnick said he is surprised by Microsoft's underperformance vs. the iShares Expanded Tech-Software Sector ETF.
"Our sense is this can be largely attributed to some of the shine coming off the AI trade amid concerns around demand and returns on rising investments given still tepid monetization at the application layer and headwinds from algorithmic and hardware improvements driving unit costs lower," Zelnick said.
He added, "Microsoft acknowledging it was slowing or pausing some AI data center projects likely served as confirmation for many."
Truist Securities analyst Joel Fishbein Jr. kept his buy rating on Microsoft with a price target of 600.
MSFT stock is in the IBD Long-Term Leaders Portfolio.
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