Microsoft: Double-Digit Growth Again In Q3, Excluding Currency
(Preview) Company Update (MSFT US) (Buy)
Summary
MSFT stock fell 7.7% after Q1 FY23 results last Wednesday and is now down 30% year-to-date and trading at 25.0x FY22 EPS.
We believe investors misunderstood. While EPS growth was just 3%, this was largely due to currency; constant currency growth was 11%.
Macro is weaker, hurting some areas like Windows OEM sales, but Cloud and other recurring revenue lines are still growing strong.
Cost growth is expected to moderate materially, and FY23 outlook is for another year of double-digit constant-currency EBIT growth.
With shares at $232.12, our forecasts indicate a total return of 110% (22.9% annualized) by June 2026. Buy.
Introduction
Microsoft Corporation stock lost 7.7% last Wednesday (October 26) following Q1 FY23 results and has not recovered, which means the share price is down 31% year-to-date.
Microsoft has been a core holding for us since 2014, and we initiated our Buy rating on Seeking Alpha in December 2020. After the recent correction, MSFT stock’s gain since our initiation sta…