By Sam Boughedda
Analysts at BofA and Citi raised their price targets for Microsoft (NASDAQ:MSFT) and reiterated Buy ratings on the stock ahead of the tech giant's earnings release next week.
BofA analysts lifted the price target to $320 from $300, telling investors that they expect some topline downside from PCs.
"We expect weaker PCs to weigh on topline, though we view this as a temporary macro headwind. We note Windows comparisons improve significantly in Q4FY22 (-7% y/y vs +8% in Q3FY22). Also, while cloud optimization headwinds are unlikely to improve NT, our Q4 Azure cc growth of 24% already reflects a 5-6% point decel from Q3. We believe that Azure growth is likely nearing the bottom," the analysts wrote.
They added that BofA believes MSFT shares will continue to rerate higher with "a path back to mid-teens growth" and a "growing AI contribution to growth."
At Citi, analysts increased the firm's price target on the stock to $332 from $282. They said that "amidst a rich catalyst path of generative AI monetization, we see a relatively uneventful FQ3 set-up as numbers are more likely to be negatively impacted by Macro and IT spending headwinds."
However, the firm's "reseller checks and conversations trended more constructive this Q with better quota achievement and growth trends vs. FQ2. That said, we are baking in incremental caution on Azure consumption with ongoing optimization headwinds, and our revised FY24 Azure growth estimates are 5 pts below the Street."