Microsoft: Strong Start To FY22 With Q1 Beating Guidance Significantly
(Preview) Company Update (MSFT US) (Buy)
Summary
Microsoft reported strong Q1 FY22 results that were significantly better than its guidance, sending its shares up 2% in aftermarket trading.
Q1 revenues grew 20% year-on-year excluding currency, and operational leverage and currency helped drive EPS growth to 25% in USD.
All three segments grew year-on-year, and Q2 outlook implies high-teens growth in revenues and EBIT next quarter.
Strong growth trends continued to be visible across key products in all of Microsoft's segments, supporting our growth expectations.
With shares at $310.11, we expect a total return of 56% (13.1% annualized) by June 2025, in just under 4 years. Buy.
Introduction
We review our investment case on Microsoft after it released Q1 FY22 results overnight (on Tuesday, October 26). MSFT stock rose 2.0% in after-market trading after the results.
We initiated our Buy rating on Microsoft on Seeking Alpha in December 2020, though it has been a core holding in our portfolio since 2014. As of Tuesday's close, MSFT shares…