Microsoft Corporation (NASDAQ:MSFT) just released its second-quarter report and things are looking bullish. It was overall a positive result, with revenues beating expectations by 3.4% to hit US$37b. Microsoft reported statutory earnings per share (EPS) US$1.51, which was a notable 14% above what analysts had forecast. This is an important time for investors, as they can track a company’s performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. With this in mind, we’ve gathered the latest statutory forecasts to see what analysts are expecting for next year.
See our latest analysis for Microsoft
Taking into account the latest results, the current consensus from Microsoft’s 30 analysts is for revenues of US$142.2b in 2020, which would reflect a satisfactory 5.9% increase on its sales over the past 12 months. Statutory per-share earnings are expected to be US$5.68, roughly flat on the last 12 months. Yet prior to the latest earnings, analysts had been forecasting revenues of US$140.3b and earnings per share (EPS) of US$5.39 in 2020. Analysts seem to have become more bullish on the business, judging by their new earnings per share estimates.
The consensus price target rose 11% to US$194, suggesting that higher earnings estimates flow through to the stock’s valuation as well. That’s not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Microsoft, with the most bullish analyst valuing it at US$210 and the most bearish at US$150 per share. This shows there is still quite a bit of diversity in estimates, but analysts don’t appear to be totally split on the stock as though it might be a success or failure situation.
It can also be useful to step back and take a broader view of how analyst forecasts compare to Microsoft’s performance in recent years. It’s pretty clear that analysts expect Microsoft’s revenue growth will slow down substantially, with revenues next year expected to grow 5.9%, compared to a historical growth rate of 8.5% over the past five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 12% per year. Factoring in the forecast slowdown in growth, it seems obvious that analysts still expect Microsoft to grow slower than the wider market.
The Bottom Line
The most important thing to take away from this is that analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Microsoft following these results. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations – although our data does suggest that Microsoft’s revenues are expected to perform worse than the wider market. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.
Still, the long-term prospects of the business are much more relevant than next year’s earnings. We have estimates – from multiple Microsoft analysts – going out to 2024, and you can see them free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
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