Microsoft Corporation (MSFT) Stock: This Old Dog Can Still Hunt

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Microsoft Corporation (NASDAQ:MSFT) made waves after reporting fiscal fourth-quarter numbers after the close on Tuesday, as stellar results from its cloud business sent Microsoft stock rallying 5.3% the following day, their biggest jump in nine months.

Microsoft stock, MSFT

Earnings came in at $0.69 a share, up from $0.62 a share last year and besting estimates by $0.11. Revenue was also solid at $22.64 billion, up from $22.18 billion last year and ahead of consensus at $22.15 billion.

The Strength Within MSFT’s Earnings

But the standout in the quarter was Microsoft’s cloud segment. Azure, which is the company’s major cloud offering, saw its revenue increase 102%. And the entire intelligent cloud segment saw a 7% gain in revenue to $6.7 billion, while analysts had expected $6.61 billion.

The commercial cloud business ended fiscal 2016 with an annualized run rate of $12.1 billion. Management indicated they expect that number to hit $20 billion by fiscal 2018, as they said nearly 60% of Fortune 500 companies currently have at least three of their cloud offerings.

These solid results come as MSFT continues to struggle in the phone and PC market. The company saw phone sales fall 71% in the quarter, and looking ahead to the current quarter, management forecasted a 6% decline in its PC business.

You can tell the Street is focusing on the cloud because Microsoft was rewarded with several analyst upgrades following the report. Deutsche Bank reaffirmed its buy rating and $65 target. Barclays maintained its overweight rating and $60 price target. And BMO Capital Markets raised its price target from $57 to $62 while also increasing its current quarter earnings estimates from $0.64 to $0.70 a share.

While it was too early for Microsoft’s recent acquisition of LinkedIn Corp (NYSE:LNKD) to have any effect on results, CEO Satya Nadella did speak to its usefulness, citing industries including recruiting, training and marketing. He said, “I sort of look at what we’re doing with Office 365, Dynamics 365, app stores, and LinkedIn as part of the same strategy … The professional network helps all of that.”

I liked that MSFT’s rally on Wednesday helped power the blue-chip Dow higher. In the end, there are clear tech stories that include cloud and the ability to gather and analyze data.

The security part gets the headlines, but it has been hampered lately by miscues and hype, although it will live up to that hype one day. That said, I like what we’re seeing from older tech names like MSFT. Some of these companies are getting it done and reinventing themselves to stay in the game.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/07/msft-microsoft-stock-old-dog-hunt/.

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