Sam Boughedda

Karl Keirstead, UBS analyst, reiterated the firm’s Buy rating on Microsoft (NASDAQ) and the $360 price target for Microsoft in a Thursday note to investors. This was despite revisions to estimates.

An analyst recognized that there were “plenty” Microsoft issues of late. These included China supply chain problems, FX headwinds and salary rises. The risk of a decline in ad-based business and on-prem licensing sales. And the possible impact on Azure of IT budget pressures.

“Bottom line, for FY23 we’re cutting our revs estimate from $229.2b (c/c +15.7%) to $225.1b (c/c +14.8%) and our EPS estimate from $10.77 to $10.39 (+12.0%), with our estimate revisions extending beyond merely FX adjustments. Microsoft has made it clearer that they aren’t immune to macros and are making adjustments accordingly. We are reducing our 1Q/Sept 202022 c/c estimation from 44.7% – 43.9% and FY23’s from 39.2% – 38.3% for the Azure segment,” Keirstead wrote.

Additionally, an analyst stated Microsoft shares are now trading at a FCF multiple 25x our 2023 estimate. According to their judgment, this multiple “compelling” given Microsoft’s durability, high growth rate and direct exposure via Azure to cloud infrastructure.