Breaking News
Investing Pro 0
Cyber Monday Extended SALE: Up to 60% OFF InvestingPro+ CLAIM OFFER

Microsoft Earnings Preview: Cloud Business, Acquisitions Help Fuel Growth

By Investing.com (Haris Anwar/Investing.com)Stock MarketsApr 27, 2021 09:30AM ET
www.investing.com/analysis/microsoft-earnings-preview-cloud-business-acquisitions-help-fuel-growth-200575448
Microsoft Earnings Preview: Cloud Business, Acquisitions Help Fuel Growth
By Investing.com (Haris Anwar/Investing.com)   |  Apr 27, 2021 09:30AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
MSFT
-1.89%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
AMZN
-3.31%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
NUAN
+0.00%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
IXIC
-1.93%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
  • Reports Q3, 2021 results on Tuesday, Apr. 27, after the market close
  • Revenue Expectation: $41.04 billion
  • EPS Expectation: $1.78

Looking at Microsoft's (NASDAQ:MSFT) continually escalating share price, it’s obvious investors don’t see the tech giant's strong growth momentum, which was sparked by the outbreak of the pandemic in March 2020, being interrupted anytime soon.

Microsoft Weekly Chart.
Microsoft Weekly Chart.

The stock, after surging about 40% last year, is up another 17% this year, outpacing the gains of the benchmark NASDAQ Index, which rose 9% during the same period.

The Redmond, Washington-based software behemoth has been a major beneficiary of lockdowns and the stay-at-home environment they triggered during the past year, when both corporate and individual reliance on technology surged, boosting demand for the devices and services Microsoft sells.

These favorable conditions are likely to remain even through the gradual reopening of the economy after the vaccine rollout in the U.S. and European. The company is forecast to report a 27% jump in its earnings per share to $1.78 for the fiscal 2021 third-quarter, when compared with the same period a year ago. Sales are likely to increase by 17% to $41.04 billion, according to analysts’ consensus forecast.

Due to this strong earnings momentum, all 25 analysts covering Microsoft have a buy rating on the stock, according to Tipranks. Their consensus, one-year price target is $288.08, an 11% boost from its Monday’s closing price of $261.55 a share.

When a stock is trading near an all-time high going into an earnings report and investors are so bullish, it makes sense to be careful and look for the right opportunity to jump in. Microsoft, in our view, will be a great candidate to buy on any post-earnings weakness if that occurs. 

Acquisition Spree

There are many reasons to remain bullish on MSFT. The most important one is the company’s growing share in the cloud-computing market where it’s the second-largest provider after Amazon (NASDAQ:AMZN).  

Growth in that division jumped 50% in the previous quarter as corporate clients accelerated a shift to the cloud during the pandemic, where they can store data and run applications via the internet. For more than three years running, revenue from Microsoft's Azure service has almost doubled each quarter.

With cloud sales surging and the company’s legacy Office product continuing to produce hefty cash, MSFT’s recent acquisition spree is further opening up new growth opportunities. Early this month, Microsoft agreed to buy artificial intelligence company Nuance Communications (NASDAQ:NUAN). The all-cash deal is Microsoft’s second largest acquisition after its $26-billion deal in 2016 to buy professional network LinkedIn. Microsoft has undertaken more than 100 acquisitions in the past four years, according to data provider Dealogic.

Microsoft CEO Satya Nadella believes Nuance will help the company to capture market share in tech applications for health care, where the use of artificial intelligence is exploding. “This is projected to be one of the fastest-growing infrastructure software revenue streams in history,” he said about Nuance’s expertise in clinical documentation.

Bottom Line

MSFT is well-positioned to expand its market share into new areas of the digital economy while maintaining its leading position with legacy software products like Windows and Office.

This durable advantage will help the company achieve sustained double-digit growth in revenue, earnings per share and free cash flow, making it a reliable tech stock to own over the long term.

Microsoft Earnings Preview: Cloud Business, Acquisitions Help Fuel Growth
 

Related Articles

Microsoft Earnings Preview: Cloud Business, Acquisitions Help Fuel Growth

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Banele Hlanjwa
Banele Hlanjwa Apr 27, 2021 3:02AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Banele
Nitin Adhikari
Nitin Adhikari Apr 27, 2021 3:02AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Binod
andre vareg
andre vareg Apr 27, 2021 3:02AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
sumadre
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email