Microsoft: Reassuring Q4 FY22 Results & New FY23 Outlook

(Preview) Company Update (MSFT US) (Buy)

Summary

• MSFT stock rose 4.0% in aftermarket trading after Q4 FY22 results and new FY23 outlook points to double-digit EBIT growth continuing.

• Q4 FY22 saw revenues grew 16% and EBIT grew 14% in local currencies, but currency and tax meant EPS grew 3% in USD.

• Underlying trends remained strong in most Microsoft businesses. New FY23 outlook included double-digit EBIT growth in local currencies.

• We believe Microsoft can sustainably grow its EPS at low-teens, and that its P/E should re-rate from 28x now back to 37.5x.

• With shares at $261.90, we expect a total return of 90% (24.8% annualized) by June 2025, in just under 3 years. Buy.

Introduction

Microsoft Corporation stock rose 4.0% in aftermarket trading on Tuesday (July 26) after the company released Q4 FY22 results, but are still 25% below their 52-week high.

Microsoft has been a core holding in our portfolio since 2014, and we initiated our Buy rating on Seeking Alpha in December 2020. MSFT stock’s gain since our initiation currently stands at …