By Sam Boughedda
Morgan Stanley told investors in a note on Tuesday that Microsoft (NASDAQ:MSFT) is one of the firm's most preferred names in the software space.
Microsoft is currently rated Overweight with a $354 price target by Morgan Stanley. Morgan Stanley said the company is preferred due to its combination of "strong secular positioning and a reasonable valuation."
"Although CIOs' 2022 software budget growth expectations further moderated to ~3.7% (down from ~4.1% prior quarter), Microsoft is likely to be better positioned than most. Microsoft continues to occupy the attractive secular segments of the software space, which should protect the company more than most of its peers during a macro downturn," wrote Morgan Stanley.
Analysts went further into detail, stating that Microsoft has high exposure to the most important CIO priorities, specifically around cloud computing, software security, digital transformation and DW/BI/analytics.
"Given the spending in these segments is expected to see the largest increases, Microsoft should directly benefit from their growth in 2022," they added. "Microsoft also well positioned defensively. Among the CIOs surveyed, Security Software, Cloud Computing, and Digital Transformations are also segments least likely to be cut."
As a result, Morgan Stanley believes that all of the factors, combined with a valuation still at a discount to peers, "sets MSFT up as a defensive name under the current market conditions."