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Near-term cyclical impacts create an attractive entry point into Microsoft (NASDAQ:MSFT), Morgan Stanley analysts said on Monday.
The analysts, who have an Overweight rating and a $307 price target on Microsoft shares, also said there is more to like about the tech giant than AI.
“Easing compares, price increases, waning FX headwinds and decelerating opex all work to accelerate EPS growth to double digits by Q4, with accelerating EPS growth in each of the next five quarters,” explained the analysts.
They believe this dynamic should bring investors back to Microsoft, given its strong stock performance is “historically aligned to EPS growth and a broader market backdrop where earnings outside of software look to be coming under increasing pressure.”
“While cloud margins are likely to peak at ~72%+ this fiscal year, we estimate total company gross margins can still expand further from current levels and approach 70% over-time,” the analysts also wrote.
They stated that the firm expects a quick return to double-digit EPS growth by Q4 for Microsoft, with “accelerating EPS growth in each of the next five quarters.”
