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Microsoft (MSFT) earnings preview: high double-digit revenue growth

Carla Olson | 6:58 pm ET, 15 Jul 2018

Microsoft Corporation (MSFT) is expected to report earnings on July 19 after market close.  The report will be for the fiscal Quarter ending June 2018.  Shares are trading at 101.98, down -0.14%.

What are MSFT earnings expectations?  What news will the market be watching out for?  

Investors are eager to hear any updates on the GitHub acquisition.  Last month Microsoft announced that it has entered into an agreement to purchase GitHub for $7.5 billion, financed entirely by Microsoft stock.  GitHub is a community of 28 million software developers who contribute code to more than 85 million open-source software projects. Microsoft has been an avid proponent of GitHub for several years, rising to the top of the list in terms of code commitments to GitHub, and the companies have reportedly had on-and-off discussions about an acquisition for the past several years. 

Although this deal is roughly one fourth the size of Microsoft’s 2016 acquisition of LinkedIn, GitHub will provide unique opportunities for Microsoft Azure customers.  Management expects GitHub to be accretive to adjusted operating income in fiscal 2020.

Microsoft Corporation has a history of beating analysts’ earnings estimates. In the past four quarters, the company: 

  • Beat analyst EPS estimates by 27 cents ($.98 actuals vs. $.71 forecast) in FQ4’17;
  • Beat analyst EPS estimates by 12 cents ($.84 actuals vs. $.72 forecast) in FQ1’18;
  • Beat analyst EPS estimates by 10 cents ($.96 actuals vs. $.86 forecast) in FQ2’18;
  • Beat analyst EPS estimates by 10 cents ($.95 actuals vs. $.85 forecast) in FQ3’18.

For FQ4’18, EPS is expected to grow by 9% year-over-year to $1.07, while revenue is expected to grow 18% year-over-year to $29.17 billion.  

Over the last month, Microsoft Corporation (MSFT) returned +0.92%.

Microsoft Corporation (MSFT) average analyst price target ($111.76) is 9.59% above its current price ($101.98).

For the latest price and information on Microsoft Corporation, please visit Finstead and search for "MSFT price" or "MSFT news".

Microsoft is one of the most important cloud computing firms in the world. Azure, the firm’s public cloud service, has established itself as the number-two player in the space behind Amazon, and the platform should continue to garner significant user growth as Microsoft leverages Azure-hosted software such as Office 365 and Dynamics 365. 

Public cloud represents a monumental opportunity for Microsoft as new workloads increasingly shift to the cloud, and the firm has curated a rich set of software and tools that will help keep developers in the ecosystem. The rise of Azure should help make up for any potential erosion in the firm’s legacy Servers and Tools businesses, as many of those spending buckets shift to the cloud. 

Disclaimer: The news article above expresses the author’s opinion about the topic of the article. We strongly advise you not to base your investment decisions just on this article alone. If you’d like to become a writer for Finstead Bites, please send us an email at hi@finstead.com.


Red Hat (RHT) earnings preview: what to expect?

Carla Olson | 8:33 am ET, 21 Jun 2018

On Thursday, June 21, after the closing bell Red Hat, Inc. (RHT) is announcing its Q1'19 earnings.  Red Hat shares are now trading at $172, up 0.82%.  What can you expect from RHT earnings?  What will be the biggest RHT stock news?  

For the first quarter, the company is expected to make $807 million in revenue, a 19% increase over last year's first quarter.   The consensus Earnings Per Share (EPS) is $0.68, representing a 23% year-over-year increase.

RedHat has a strong history of growth.    Both revenue and EPS have grown double-digit in the past 8 quarters.  

The company has also massively exceeded Wall Street analyst expectations.  In the most recent quarter, the company beat the Wall Street consensus EPS by 11 cents, 14% above what the analysts had predicted.

Red Hat's growth is predicated on its strong partner base, which includes companies such as Google Cloud Platform, Microsoft Azure and Amazon Web Services, IBM and Dell.  Those partnerships are helping Red Hat sell its cloud-based technologies and products; management expects the partner base to drive 80% of new bookings in the near term.

Over the last couple of years, Red Hat acquired a number of startups: CoreOS, Permabit, Codenvy, 3scale, Ansible, FeedHenry, eNovance, Inktank, and Codenvy. The company’s acquisitions that are now integrated with its mainstream business have expanded its product portfolio into new segments, such as hybrid cloud computing, cloud management, OpenShift, OpenStack, and storage.

What drives Red Hat's growth, in particular, is OpenShift.  The market for OpenShift is expanding rapidly.  Another driving force for the quarter is Red Hat’s containerized application offering.

Over the last month, Red Hat, Inc. (RHT) returned +4.51%.

Red Hat, Inc. (RHT) forward P/E ratio is 43.65, and it’s high compared to its industry peers’ P/E ratios.

Red Hat, Inc. (RHT) average analyst price target ($168.45) is -1.28% below yesterday's close-of-business price ($170.64).  The RHT stock forecast does seem particularly bullish at this point. 

For the latest price and information on Red Hat, Inc., please visit Finstead and search for "RHT price" or "RHT news".

Disclaimer: The news article above expresses the author’s opinion about the topic of the article. We strongly advise you not to base your investment decisions just on this article alone. If you’d like to become a writer for Finstead Bites, please send us an email at hi@finstead.com.


Splunk (SPLK) price forecast: what can you expect now?

Carla Olson | 2:02 pm ET, 25 May 2018

Splunk is down 3% post-earnings release.  What can you expect from the SPLK stock price now?

Splunk reported first-quarter results that were in line with analysts' expectations as the firm continues to execute well on its transition to cloud-based services and subscription-oriented contracts. 

The management team offered a solid outlook for the balance of the year. Splunk is likely to expand its presence within the enterprise sector, but there are other companies in the enterprise space with better growth prospects. Some names that come to mind are Microsoft, Guidewire, Salesforce, Blackbaud, and ServiceNow.

First-quarter revenue rose 37% versus the prior-year period to $312 million. Management continues to see strong adoption of Splunk’s enterprise platform beyond security, as use cases for IT Ops, DevOps, and Cloud Management remain popular applications for Splunk’s solutions. 

Large deals continue to flow as a result of Splunk’s versatile platform, with the firm closing 43 seven-figure deals in the quarter, up from 35 in the year-ago period. 

The firm added 460 customers in the quarter.  Annual contract value (ACV) rose 21% versus the prior-year period to just over $80,000, suggesting customers are not only spending more with Splunk earlier in the cycle but growing their consumption as the relationship matures. 

Management lifted its full-year revenue outlook to $1.64 billion, up from $1.62 billion. The firm is well positioned to exceed its fiscal 2020 revenue goal of $2 billion.

Based on Finstead research, SPLK price target upside is -17.78% (visit Finstead and type "SPLK upside" to get the latest scoop).  

Over the last year, SPLK returned +71.73%. This return is higher than Application Software sector (29.63%), Technology industry (18.70%), S&P 500 (12.95%) returns.

Disclaimer: The news article above expresses the author’s opinion about the topic of the article. We strongly advise you not to base your investment decisions just on this article alone. If you’d like to become a writer for Finstead Bites, please send us an email at hi@finstead.com.


Microsoft (MSFT): How High Is The Sky?

Carla Olson | 7:17 pm ET, 27 Mar 2018

Microsoft (NASDAQ: MSFT) declined 5% in today’s trading, to below $90 per share.  Is this a good buying opportunity?   

The equity selloff among the top technology companies was instigated by Trumps's recent political announcement regarding tariffs on foreign goods.  The magnitude of the impact is $60 billion tariffs on Chinese imports.  The worst hit industries will be tech hardware and machinery. 

Beijing reacted by announcing its target--128 US projects which have an import value of $3 billion.  This resulted in a 6% decline for the IT Sector.

But Microsoft has a lot of things going for it.

The recent increase in the company's margins has resulted from the adoption of Azure, Microsoft’s public cloud, more profitable channel distribution, and an ever-growing customer base. The hope is that Microsoft will have a $50 Billion EBIT by mid-2019.

The firm anticipates doubling of the public cloud market to $230B by 2020.  Morgan Stanley thinks Microsoft will hit a $1 Trillion market cap in the upcoming year.

Such a rally over the course of this and next year would make MSFT go from the third largest public enterprise (only Apple and Alphabet and larger judging by market capitalization) to the largest one.

Per Finstead Research, Microsoft has an average price target of almost $104. Its price upside is almost 14%.

Microsoft’s valuation is fairly high among its peers (based on the forward P/E ratio), lagging only ADBE, RHT, and CRM.


Disclaimer: The news article above expresses the author’s opinion about the topic of the article. We strongly advise you not to base your investment decisions just on this article alone. If you’d like to become a writer for Finstead Bites, please send us an email at hi@finstead.com.


Shopify: Can The Stock Move Higher?

Carla Olson | 2:25 pm ET, 26 Mar 2018

There has been a 700% rise in Shopify’s stock (NYSE: SHOP) price since 2015.   But what is the stock price prediction?

Shopify's "Facebook problem"--its dependence on getting the data from the social networking site--had caused a dip in its stock price recently.

The Ottawa-based company enables smaller merchants to compete with huge retailers such as Amazon.com by providing them with tools and websites to run their operations.

Google inked a deal with Shopify to assist it in hosting its online e-commerce stores. The hosting will be done on Google's Infrastructure-as-a-Service.   This is a shrewd strategic move by the search engine giant in its attempt to compete with Amazon. 

A few other major retailers besides Shopify have switched from the rival’s Amazon Web Services to Google Public Cloud or Microsoft Azure.

Shopify's focus on the SMB segment, which is prone to headwinds in the retail sector makes it risky to buy the stock now.

Per Finstead Research , Shopify’s average price target is almost $145 which is comparable to its current price (visit Finstead.com and type "Shopify price target").  


Shopify’s valuation is the highest among its peers.

Our simple thought on Shopify is, hold for now.  It may be too risky to jump in at this point.

Disclaimer: The news article above expresses the author’s opinion about the topic of the article. We strongly advise you not to base your investment decisions just on this article alone. If you’d like to become a writer for Finstead Bites, please send us an email at hi@finstead.com.


Salesforce.com (CRM): Is Acquiring MuleSoft (MULE) A Dumb Move?

Carla Olson | 3:37 pm ET, 21 Mar 2018

The acquisition of MuleSoft (MULE) by Salesforce (CRM) for around $6.5 billion is the largest in Salesforce’s  history. 

This may be expensive, but it’s strategic.  It enables CRM to compete with its chief rivals such as Microsoft Corporation (MSFT) and Oracle Corporation (ORCL).

How so? With its integration capabilities, Mule Soft can help Salesforce migrate competitor workloads to the Salesforce platform.  A particular target for this effort is Oracle.  While Oracle might have neglected its Marketing Cloud acquisitions, Salesforce is ready to take that business away from it.  

Mule Soft has manifested rapid growth through a 58% year-over-year surge in its revenue in 2017. The integration software maker has renowned brands as its customers (e.g., Coca-Cola, Mc Donald’s and Barclays).

Salesforce’s revenue will increase immediately after the acquisition, but not materially. But this aggressive step will help CRM achieve the $20B target by 2022.

How should you react as a Salesforce investor?  The acquisition should not fundamentally change your thinking.  Although expensive, it also has a lucrative upside. 

According to Finstead research, CRM’s average price target is comparable to its current price (visit Finstead.com and type "CRM price target").

Salesforce's long-term growth potential is evident from its constant effort in business expansion through strategic acquisitions and investments.

Over the last year, CRM returned +50.93%. This return is higher than Application Software sector (31.82%), Technology industry (22.52%), and S&P 500 (14.47%) returns.

Disclaimer: The news article above expresses the author’s opinion about the topic of the article. We strongly advise you not to base your investment decisions just on this article alone. If you’d like to become a writer for Finstead Bites, please send us an email at hi@finstead.com.


Microsoft Corporation (MSFT) Buy or Sell Stock Guide

Updated at: 8:57 pm ET, 24 Nov 2018

The analysis below may be helpful to you if you have any of the following questions about MSFT stock:

  • Is MSFT a buy or a sell?
  • Should I sell or hold MSFT stock today?
  • Is MSFT a good buy / a good investment?
  • What are MSFT analyst opinions, recommendations, ratings?

Here are MSFT stock buy reasons/signals:

1. Microsoft has solidified its position as the number-two public cloud vendor with its Azure platform, which should provide substantial growth for several years. The cloud model implies that information and applications are stored, managed and protected in the cloud, from where only necessary amounts of data are accessed by users. Microsoft is increasingly offering their software as-a-service on the basis of subscription for specified periods.

2. Windows 10 is the most rapidly adopted operating system Microsoft has released to date.

3. Microsoft’s newfound willingness to embrace third-party and open-source developer tools should help keep existing application developers on the Microsoft ecosystem, while attracting new ones.

4. Microsoft has a dominant position in the desktop PC market, with its operating systems being used in the majority of PCs worldwide. This is particularly true of the enterprise where the company generates much of its revenue and profits. But enterprise computing is undergoing changes with companies increasingly opting for the BYOD (bring-your-own-device) model.

5. Microsoft is one of the three largest providers of gaming hardware. Its Xbox console was one of the first gaming devices of its kind. Microsoft supplemented the hardware with a number of popular video game titles.

6. Microsoft’s Bing search engine is taking market share largely from smaller rivals and benefiting from its agreement with Yahoo. Strategic actions, such as the agreement with HP to put Bing as the default search engine on its PCs have also helped. Also, Apple and Google are increasingly competing with each other in the mobile segment, which is proving to be of strategic importance to Microsoft.

7. Microsoft's execution has been excellent. This has helped Microsoft build cash and short term investments balance. The significant amount of cash provides the flexibility required to pursue any growth strategy, whether by way of acquisitions or otherwise. Also, the focus on cost reduction has increased, which is a positive for cash flow.

8. MSFT quarterly revenue growth was 18.50%, higher than the industry and sector average revenue growth (8.37% and 5.22%, respectively).

9. MSFT profitability is improving. The YoY profit margin change was 3.88pp.

10. MSFT forward dividend yield is 1.68%, higher than the industry (0.44%) and sector (0.24%) forward dividend yields.

11. MSFT average analyst rating is Strong Buy.

12. MSFT average analyst price target ($121.06) is above its current price ($103.07).

Here are MSFT stock sell reasons/signals:

1. The Windows OS will likely continue to decline as alternatives flood the market and end users increasingly use a wider array of devices. Microsoft continues to be impacted by the tablet and mobile cannibalization of computers. This is a secular negative for the company; the future growth of Windows is greatly dependent on its ability to build position in mobile devices, particularly tablets.

2. Amazon maintains a commanding lead over Microsoft in the public cloud space, and any slip-ups could place Azure further behind the eight ball as Google and others nip at the firm’s heels.

3. Microsoft’s hardware business will remain considerably cyclical and will generally serve as a drag on margins for the foreseeable future.

4. Google poses a particular threat to Microsoft. Although Google’s focus has in the past been on search and online advertising, while Microsoft’s has been on selling its software, the two companies are increasingly pitted against each other because of the conditions in the market. Google is now interested in not just search, but also other digital goods, cloud infrastructure and hardware, which are all important to Microsoft.

What are your thoughts on MSFT?

If you liked this analysis, check out Buy or Sell Stock Guides for other stocks.

Disclaimer: The news article above expresses the author’s opinion about the topic of the article. We strongly advise you not to base your investment decisions just on this article alone. If you’d like to become a writer for Finstead Bites, please send us an email at hi@finstead.com.


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