Just over a week ago, Microsoft MSFT released its fiscal second quarter results, surprising the market with Q2 earnings of $2.93 a share beating estimates by 6% and sales of $62.02 billion, outstripping expectations by over 1%.
Despite this, Microsoft’s stock performance has remained stagnant since it exceeded Q2 expectations. However, analysts remain bullish on the company’s outlook.
Growth & Recent Performance
Amidst the storm of quarterly reports from its peers such as Amazon (AMZN), Apple (AAPL), and Meta Platforms (META), it might have been easy to overlook Microsoft’s Q2 report. Nonetheless, Microsoft’s Q2 earnings soared 26% year over year, with quarterly sales also rising by 17%. This growth has been primarily fueled by its cloud services, and annual earnings are now projected to surge by 18% in fiscal 2024 to reach $11.60 per share, while total sales are forecasted to climb by 15% to $243.38 billion.
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Over the last year, Microsoft’s stock has surged by +54%, and the expectation of double-digit EPS and sales growth in FY25 is likely to keep investors engaged.
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Earnings Estimate Revisions & Broker Recommendations
Building a stronger case for buying Microsoft’s stock is the fact that the earning estimates for FY24 and FY25 have significantly increased over the last 30 days, with a 3% rise in the last week alone.
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Currently, Microsoft holds an Average Broker Rating (ABR) of 1.14 on a scale of 1 to 5 (Strong Buy to Strong Sell). In line with this, 33 out of 37 brokers covering Microsoft’s stock and providing data to Zacks have strong buy ratings, with three holding buy ratings and only one at a hold.
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Bottom Line
There seems to be more potential for Microsoft’s stock to grow, with the Average Zacks Price Target of $438.97 a share, indicating an 8% upside. Furthermore, Microsoft’s stock currently holds a Zacks Rank #2 (Buy) in line with the trend of positive earnings estimate revisions following the favorable Q2 results.
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