The Quality Will Shine Through Again in F3Q22 Earnings, Says Analyst


Earnings season will welcome the big hitters next week, and hardly come any bigger than Microsoft (MSFT). The tech giant will report F3Q22’s (March quarter) financials after the close on Tuesday, April 26, with the stock sitting in unfamiliar territory; 18% into the red in 2022, and unable to counter the overall market and macro trends.

However, that is not a concern for Deutsche Bank analyst Brad Zelnick, who stresses that you just can’t beat class, a trait Microsoft has in abundance.

“With the stock underperforming the S&P 500 since quarter end on the back of recession jitters and alleged demand pull-forward, we believe MSFT’s premium quality and undemanding valuation will prevail into and out of next week’s event,” the 5-star analyst opined.

Zelnick’s top-and bottom-line estimates are more or less the same as the Street’s, anticipating revenue/adj. EPS of $48.8 billion/$2.18, respectively.

More importantly, however, as has shown to be the case so often in recent times, amidst the present background of macro volatility with Russia-Ukraine conflict, inflation and interest rates hogging the headlines, Zelnick expects investors will mostly focus on “forward looking commentary and Commercial Bookings as a key leading indicator of the broader demand backdrop.”

Sounding one note of caution, here Zelnick reminds investors that the pace of Booking growth should slow down quarter-over-quarter from F2Q’s levels (up 37% YoY @CC), given the 20pt “harder” year-over-year comp and “lower expiry base.”

However, helping to further validate the “resilience” of Microsoft’s business model in the present setting, Zelnick anticipates continued double-digit year-over-year “expansion.”

“Indeed,” the analyst went on to say, “we take comfort in the company’s full-span value proposition from the Intelligent Cloud to the Intelligent Edge that includes the widest and deepest competitive moats of any company we cover and benefits from the structural trend towards digitization across all sectors of the global economy.”

Unsurprisingly, then, Zelnick rates MSFT stock a Buy, while his $390 price target implies ~42% potential upside over the next 12 months. (To watch Zelnick’s track record, click here)

Overall, Microsoft stock is that rare beast – a name with plenty of analyst coverage on which everyone is in full agreement; the stock’s Strong Buy consensus rating is based on Buys only – 25, in total. Going by the $371.13 average target, shares are anticipated to climb ~35% higher over the one-year timeframe. (See Microsoft stock forecast on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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