Microsoft firing on all cylinders

The wide-moat firm remains a safe harbor in a sea of rich software valuations

Dan Romanoff, CPA 22 July, 2019 | 1:28AM

Microsoft

Microsoft (MSFT) reported results that were ahead of consensus expectations, with meaningful upside to revenue, operating margin, and normalized EPS. All three segments contributed approximately equally to revenue strength. Similar to last quarter, management struck a confident tone on the call while offering guidance that was essentially in line. Overall, results continue to reinforce our thesis, centering on customer adoption of hybrid cloud environments with Azure. Microsoft continues to use its dominant position of on-premises architecture to allow customers to move to the cloud easily and at their own pace, which we believe will continue. Adoption of cloud services in the form of SaaS, PaaS, and IaaS remains robust for Microsoft, and the company has passed inflection points where cloud revenue is strong and margins continue to improve. 

We are raising our fair value estimate to US$155 per share, from US$143, after rolling our DCF model and making a variety of minor adjustments. We believe wide-moat Microsoft is firing on all cylinders and remains a safe harbor in a sea of rich software valuations.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Microsoft Corp183.51 USD0.04

About Author

Dan Romanoff, CPA  Dan Romanoff, CPA, is an equity research analyst on the technology, media, and telecommunications team for Morningstar.