Microsoft Corporation MSFT 0.2% shares are surging 6.2 percent on Wednesday following the company’s Q2 earnings beat. Canaccord analyst Richard Davis admits that the numbers from Microsoft were strong, but he is still not convinced the stock is a Buy.
Canaccord was hoping for a pullback in Microsoft large enough to justify an upgrade. Instead, the post-earnings spike has kept the stock fully-valued.
“Microsoft has attractive long-term prospects, but the stock today is neither especially cheap nor expensive,” Davis explained.
Pros And Cons
On the positive side, he pointed out that year-over-year 59 percent growth in Office 365 and staggering 108 percent growth in Azure revenue suggest plenty of opportunities for long-term growth ahead. In addition, the company reiterated its goal of $20 billion in commercial cloud revenue in fiscal 2018.
On the negative side, Davis pointed out that the majority of EPS upside was due to a below-guidance 15 percent tax rate and a surprise $476 million from the “Other Items” category due to portfolio rebalancing. In addition, the company’s revenue guidance for fiscal Q1 of 2017 came in slightly below Canaccord’s projections due to weakness in the “more personal computing” segment.
Overall, Canaccord sees…
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